Review of the Economics of Enforcing Environmental Policies

This article reviews fundamental economic concepts of enforcing environmental policies. It describes the basic economic theory of compliance with environmental regulations and reviews empirical tests of hypotheses that the theory produces. It also presents some conceptual notions about the efficient design of enforcement strategies. The article deals with enforcement of traditional command-and-control polices, as well as enforcement of newer price-based polices. To provide a consistent context the review is focused on enforcement of environmental policies directed at industrial sources of pollution, because this is the main focus of the related literature. However, the same fundamental concepts apply in many regulatory contexts.