Environmental policy as a multi-task principal-agent problem

Laurent Franckx and Alessio D'Amato ()

Energy, Transport and Environment Working Papers Series from KU Leuven, Department of Economics - Research Group Energy, Transport and Environment

Abstract: We use a multi-task principal-agent model with moral hazard to study environmental regulation of a private agent by an EPA that can also allocate its budget to an alternative project with environmental benefits. In a first possible optimum, the EPA imposes a flat fine that exhausts the agent's participation constraint. In the second, the EPA provides the harshest possible punishment for a "poor" observed environmental performance and the highest possible reward for a "good" observed environmental performance. Increases in the available budget and in the maximally allowed penalty have then an ambiguous e_ect on total environmental quality.

Keywords: environmental regulation; multi-tasking (search for similar items in EconPapers)
JEL-codes: D23 D82 K00 Q28 (search for similar items in EconPapers)
Pages: 20 pages
Date: 2003-11
New Economics Papers: this item is included in nep-env, nep-law and nep-mic
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Persistent link: https://EconPapers.repec.org/RePEc:ete:etewps:ete0312

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