Voluntary pollution abatement and regulation in the presence of a green market
Michael Delgado () and
Neha Khanna
MPRA Paper from University Library of Munich, Germany
Abstract:
We present a model in which firms voluntarily abate emissions in a market that values environmental quality such that firms can charge a premium for goods that are environmentally friendly. Our results establish conditions under which mandatory abatement crowds out voluntary abatement, or, alternatively, provides an incentive for firms to increase their level of voluntary abatement in order to maintain product differentiation. In addition, we identify cases under which firms that do not abate voluntarily would support mandatory abatement if they are able to collectively pass off (at least part of) the costs of abatement to consumers. Our model predicts that regulatory policies that ignore voluntary abatement are likely to over-regulate non-abating firms compared to the level of regulation that accounts for voluntary abatement if consumer income levels in the green market are relatively high. If consumer income levels in the green market are relatively low, regulation may be ineffective in improving overall environmental quality.
Keywords: Voluntary Pollution Abatement; Regulation; Markup (search for similar items in EconPapers)
JEL-codes: K32 Q52 Q58 (search for similar items in EconPapers)
Date: 2010-07-29
New Economics Papers: this item is included in nep-ene, nep-env, nep-law and nep-reg
References: View references in EconPapers View complete reference list from CitEc
Citations:
Downloads: (external link)
https://mpra.ub.uni-muenchen.de/25026/1/MPRA_paper_25026.pdf original version (application/pdf)
Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
HTML/Text
Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:25026
Access Statistics for this paper
More papers in MPRA Paper from University Library of Munich, Germany Ludwigstraße 33, D-80539 Munich, Germany. Contact information at EDIRC.
Bibliographic data for series maintained by Joachim Winter ().