The Effect of Allowing Pollution Offsets With Imperfect Enforcement

Hilary Sigman and Howard F. Chang

No 16860, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Public policies for pollution control, including climate change policies, sometimes allow polluters in one sector subject to an emissions cap to offset excessive emissions in that sector with pollution abatement in another sector. The government may often find it more costly to verify offset claims than to verify compliance with emissions caps. Concerns about such difficulties in enforcement may lead regulators to restrict the use of offsets. In this paper, we demonstrate that allowing offsets may increase pollution abatement and reduce illegal pollution, even if the government has a fixed enforcement budget. We explore the circumstances that may make allowing pollution offsets an attractive option when enforcement is costly.

JEL-codes: K32 K42 Q54 Q58 (search for similar items in EconPapers)
Date: 2011-03
Note: EEE LE
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

Published as Hilary Sigman & Howard F. Chang, 2011. "The Effect of Allowing Pollution Offsets with Imperfect Enforcement," American Economic Review, American Economic Association, vol. 101(3), pages 268-72, May.

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