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Multi Pollutant Yardstick Schemes as Environmental Policy Tools

Laurent Franckx (), Alessio D’Amato†, Isabelle Brose () and Isabelle Brose ()
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Alessio D’Amato†, Isabelle Brose: University of Rome “Tor Vergata”
Isabelle Brose: Department of Economics and Management, Royal Military Academy

Authors registered in the RePEc Author Service: Alessio D'Amato ()

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

Abstract: We consider environmental regulation of n risk-averse, multiple pollutant firms. We develop a “yardstick competition” scheme where the regulatory scheme depends on the di erence between a firm’s “aggregate” performance and the average “aggregate” performance of the industry. Whether this instruments dominates Pigovian taxation depends on the complete structure of the covariance matrix of the “common” random terms in measured pollution. Moreover, if the number of firms is large enough, the “yardstick scheme” is always superior to Pigovian taxation. This analysis also provides new arguments in favor of strict liability rather than negligence liability as regulatory tool.

Keywords: yardstick competition; multitasking; environmental regulation; asymmetric information (search for similar items in EconPapers)
Pages: 19 pages
Date: 2004
New Economics Papers: this item is included in nep-ene, nep-env and nep-mic
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Persistent link: https://EconPapers.repec.org/RePEc:ete:etewps:ete0416

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