Pollution Markets with Imperfectly Observed Emissions

Juan-Pablo Montero

Cambridge Working Papers in Economics from Faculty of Economics, University of Cambridge

Abstract: I study the advantages of pollution permit markets over traditional standard regulations when the regulator has incomplete information on firms’ emissions and costs of production and abatement (e.g., air pollution in large cities). Because the regulator only observes each firm’s abatement technology but neither its emissions nor its output, there are cases in which standards can lead to lower emissions and, hence, welfare dominate permits. If permits are optimally combined with standards, in many cases this hybrid policy converges to the permits-alone policy but (almost) never to the standards-alone policy.

Keywords: asymmetric information; imperfect monitoring; pollution markets; permits (search for similar items in EconPapers)
JEL-codes: L51 Q28 (search for similar items in EconPapers)
Pages: 25
Date: 2004-10
New Economics Papers: this item is included in nep-res
Note: CMI, IO
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Related works:
Journal Article: Pollution Markets with Imperfectly Observed Emissions (2005)
Working Paper: Pollution markets with imperfectly observed emissions (2004)
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Persistent link: https://EconPapers.repec.org/RePEc:cam:camdae:0456

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