The relative efficiency of market-based environmental policy instruments with imperfect compliance

Market-based Environmental Policy Instruments

The cost effectiveness of environmental policy instruments in the presence of imperfect compliance

We aim to integrate information, monitoring and enforcement costs into the choice of environmental policy instruments. We use a static partial equilibrium framework to study different combinations of regulatory instruments (taxes, standards...) and enforcement instruments (criminal fine, administrative fine...). The firms’ compliance decisions depend on the instrument combination selected by th...

Environmental Regulation: Choice of Instruments under Imperfect Compliance∗

Compliance is an important issue in environmental regulation. We discuss some of the key elements of the problem and analyze a situation where emissions are not random and firms are risk-neutral. We study the firm’s decision on emissions and compliance when the environmental regulation is based on standards and the enforcement agency audits the firm with a certain probability. We compare total ...

Voluntary Compliance with Market-Based Environmental Policy: Evidence from the U.S. Acid Rain Program

The U.S. acid rain program, Title IV of the 1990 Clean Air Act Amendments, is a pioneering experience in environmental regulation by setting a market for electric utility emissions of sulfur dioxide (SO2) and by including a voluntary compliance provision. Under the Substitution provision, non-affected electric utility units can voluntarily become subject to all compliance requirements of affect...

The relative efficiency of environmental policy instruments in a second-best setting with costly monitoring and enforcement

In this paper we in corporate monitoring and enforcement aspects in the choice of environmental policy instruments in a general equilibrium framework. Goulder et al. (JPE, 1999) look into the choice of policy instruments in the presence of distortionary taxes. We extend this model by no longer assuming full compliance from the firms. A violating firm is caught with a certain probability by the ...