Voluntary Environmental Investment and Responsive Regulation

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Voluntary Environmental Investment and Responsive Regulation

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John Maxwell ()
Christopher Decker

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John W. Maxwell

Abstract

Instances of corporate voluntary environmental investments have been rising in recent years. Motivations for such activities include corporate image building, regulatory preemption, and production cost savings. While some of these investments arise from industry attempts to set environmental standards where none currently exist, many investments seem to be aimed at reducing the costs of complying with existing regulations. Using a simple game-theoretic model, we investigate firm motivations for, and welfare consequences of, these types of voluntary investments by focusing on the role regulatory enforcement might play. We find that such investments unambiguously increase when an enforcement regulator acts as a Stackelberg follower (a regulatory structure we refer to as responsive regulation) in setting its monitoring and enforcement strategy. These additional investments may be socially undesirable, necessitating a restructuring of non-compliance penalties. Copyright Springer 2006

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

Volume (Year): 33 (2006)
Issue (Month): 4 (04)
Pages: 425-439
Download reference. The following formats are available: HTML (with abstract), plain text (with abstract), BibTeX, RIS (EndNote, RefMan, ProCite), ReDIF
Handle: RePEc:kap:enreec:v:33:y:2006:i:4:p:425-439

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Web page: http://www.springerlink.com/link.asp?id=100263

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Sam, Abdoul G. & Innes, Robert & Khanna, Madhu, 2006. "How do Voluntary Pollution Reduction Programs (VPRs) Work? An Empirical Study of Links between VPRs, Environmental Management, and Environmental Performance," 2006 Annual meeting, July 23-26, Long Beach, CA 21192, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association). [Downloadable!]
Guerrero, Santiago & Innes, Robert, 2008. "Statutory Rewards to Environmental Self-Auditing: Do They Reduce Pollution and Save Regulatory Costs? Evidence from a Cross-State Panel," 2008 Annual Meeting, July 27-29, 2008, Orlando, Florida 6204, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association). [Downloadable!]
Madhu Khanna & George Deltas & Donna Harrington, 2009. "Adoption of Pollution Prevention Techniques: The Role of Management Systems and Regulatory Pressures," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 44(1), pages 85-106, September. [Downloadable!] (restricted)
Thomas P. Lyon & John W. Maxwell, 2007. "Corporate Social Responsibility and the Environment: A Theoretical Perspective," Working Papers 2007-16, Indiana University, Kelley School of Business, Department of Business Economics and Public Policy. [Downloadable!]
Other versions:
- Thomas P. Lyon & John W. Maxwell, 2008. "Corporate Social Responsibility and the Environment: A Theoretical Perspective," Review of Environmental Economics and Policy, Oxford University Press for Association of Environmental and Resource Economists, vol. 2(2), pages 240-260, Summer. [Downloadable!] (restricted)
Thomas P. Lyon & John W. Maxwell, 2007. "Public Voluntary Programs Reconsidered," Working Papers 2007-07, Indiana University, Kelley School of Business, Department of Business Economics and Public Policy. [Downloadable!]
Innes, Robert & Sam, Abdoul, 2003. "Voluntary Pollution Abatement: Testing Alternative Theories," 2003 Annual meeting, July 27-30, Montreal, Canada 21945, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association). [Downloadable!]

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