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Comparing Environmental Policy Instruments in the Presence of Imperfect Compliance – A Case Study


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  • Sandra Rousseau


  • Stef Proost


In this paper, we aim to include rule making, implementation, monitoring and enforcement costs into the cost comparison of policy instruments. We use a simple partial equilibrium model and apply it to the textile industry. The model includes discrete abatement functions and costly monitoring and enforcement. The case study uses individual firm data to simulate the differences in abatement costs and compliance decisions between firms. We compare combinations of regulatory instruments (emission taxes, emission standards and technology standards) and enforcement instruments (criminal fines, civil fines and transaction offers). We show that the inclusion of information, monitoring and enforcement costs indeed alters the relative cost efficiency of the different instruments. Copyright Springer 2005

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Bibliographic Info

Article provided by European Association of Environmental and Resource Economists in its journal Environmental & Resource Economics.

Volume (Year): 32 (2005)
Issue (Month): 3 (November)
Pages: 337-365

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Handle: RePEc:kap:enreec:v:32:y:2005:i:3:p:337-365

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Keywords: efficiency; environmental management; government policy; illegal behaviour and the enforcement of law; transaction costs; D23; D61; K42; Q2; Q28;

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  1. Sandra Rousseau & Carole M. Billiet, 2003. "Using emission standards under incomplete compliance," Energy, Transport and Environment Working Papers Series ete0303, Katholieke Universiteit Leuven, Centrum voor Economische Studiën, Energy, Transport and Environment.
  2. Sandra Rousseau & Stef Proost, 2009. "The relative efficiency of market-based environmental policy instruments with imperfect compliance," International Tax and Public Finance, Springer, vol. 16(1), pages 25-42, February.
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Cited by:
  1. Jussi Lankoski & Erik Lichtenberg & Markku Ollikainen, 2010. "Agri-Environmental Program Compliance in a Heterogeneous Landscape," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 47(1), pages 1-22, September.
  2. Min Chen & Konstantinos Serfes, 2012. "Minimum quality standard regulation under imperfect quality observability," Journal of Regulatory Economics, Springer, vol. 41(2), pages 269-291, April.
  3. Villegas, Clara & Coria, Jessica, 2009. "Taxes, Permits, and the Adoptation of Abatement Technology under Imperfect Compliance," Discussion Papers dp-09-20-efd, Resources For the Future.
  4. Ellen Moons & Sandra Rousseau, 2005. "Policy design and the optimal location of forests in Flanders," Energy, Transport and Environment Working Papers Series ete0505, Katholieke Universiteit Leuven, Centrum voor Economische Studiën, Energy, Transport and Environment.
  5. Arguedas, Carmen & Rousseau, Sandra, 2009. "A Note on the Complementarity of Uniform Emission Standards and Monitoring Strategies," Working Papers in Economic Theory 2009/06, Universidad Autónoma de Madrid (Spain), Department of Economic Analysis (Economic Theory and Economic History).
  6. Clara Villegas-Palacio & Jessica Coria, 2010. "On the interaction between imperfect compliance and technology adoption: taxes versus tradable emissions permits," Journal of Regulatory Economics, Springer, vol. 38(3), pages 274-291, December.
  7. Vanassche, Stella & Vranken, Liesbet & Vercaemst, Peter, 2009. "The impact of environmental policy on industrial sectors: empirical evidence from 14 European Countries," Working Papers 2009/20, Hogeschool-Universiteit Brussel, Faculteit Economie en Management.
  8. Sandra Rousseau & Stef Proost, 2004. "The Relative Efficiency of Market-based Environmental Policy Instruments with Imperfect Compliance," Energy, Transport and Environment Working Papers Series ete0415, Katholieke Universiteit Leuven, Centrum voor Economische Studiën, Energy, Transport and Environment.
  9. Meynaerts, Erika & Vanassche, Stella & Vranken, Liesbet, 2010. "A Normative Approach to Incorporate Affordability Criteria for Industrial Sectors in the Design and Implementation of Environmental Policies: A Case Study Illustration," Working Papers 2010/07, Hogeschool-Universiteit Brussel, Faculteit Economie en Management.
  10. Baumann, Florian & Friehe, Tim, 2013. "Design standards and technology adoption: Welfare effects of increasing environmental fines when the number of firms is endogenous," DICE Discussion Papers 106, Heinrich‐Heine‐Universität Düsseldorf, Düsseldorf Institute for Competition Economics (DICE).


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