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Pollution control with imperfectly observable emissions

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  • Armin Schmutzler

Abstract

In this paper, a model of environmental regulation with imperfect monitoring of emissions is presented. The regulator can use linear output taxes and emission taxes to influence the pollution level of a risk-averse firm. In contrast to the perfect monitoring case, a tax mix will usually be optimal. The relative weight depends on the degree of risk aversion and monitoring imperfection, and on technological factors. Copyright Kluwer Academic Publishers 1996

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File URL: http://hdl.handle.net/10.1007/BF00782148
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Bibliographic Info

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

Volume (Year): 7 (1996)
Issue (Month): 3 (April)
Pages: 251-262

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Handle: RePEc:kap:enreec:v:7:y:1996:i:3:p:251-262

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

Related research

Keywords: Asymmetric information; pollution control; emission taxes; output taxes; monitoring problems;

References

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  1. Segerson, Kathleen, 1988. "Uncertainty and incentives for nonpoint pollution control," Journal of Environmental Economics and Management, Elsevier, vol. 15(1), pages 87-98, March.
  2. Malik Arun S., 1993. "Self-Reporting and the Design of Policies for Regulating Stochastic Pollution," Journal of Environmental Economics and Management, Elsevier, vol. 24(3), pages 241-257, May.
  3. Eskeland, Gunnar S & Jimenez, Emmanuel, 1992. "Policy Instruments for Pollution Control in Developing Countries," World Bank Research Observer, World Bank Group, vol. 7(2), pages 145-69, July.
  4. Xepapadeas, A. P., 1992. "Environmental policy design and dynamic nonpoint-source pollution," Journal of Environmental Economics and Management, Elsevier, vol. 23(1), pages 22-39, July.
  5. Harford Jon D., 1993. "Improving on the Steady State in the State-Dependent Enforcement of Pollution Control," Journal of Environmental Economics and Management, Elsevier, vol. 24(2), pages 133-138, March.
  6. Baron, David P., 1985. "Regulation of prices and pollution under incomplete information," Journal of Public Economics, Elsevier, vol. 28(2), pages 211-231, November.
  7. Devlin, R.A. & Grafton, R.Q., 1993. "Tradeable Permits, Missing Markets, and Technology," Working Papers 9301e, University of Ottawa, Department of Economics.
  8. Harford, Jon D., 1991. "Measurement error and state-dependent pollution control enforcement," Journal of Environmental Economics and Management, Elsevier, vol. 21(1), pages 67-81, July.
  9. Holmstrom, Bengt & Milgrom, Paul, 1987. "Aggregation and Linearity in the Provision of Intertemporal Incentives," Econometrica, Econometric Society, vol. 55(2), pages 303-28, March.
  10. Bruce Greenwald & Joseph E. Stiglitz, 1993. "New and Old Keynesians," Journal of Economic Perspectives, American Economic Association, vol. 7(1), pages 23-44, Winter.
  11. Cropper, Maureen L & Oates, Wallace E, 1992. "Environmental Economics: A Survey," Journal of Economic Literature, American Economic Association, vol. 30(2), pages 675-740, June.
  12. Baron, David P., 1989. "Design of regulatory mechanisms and institutions," Handbook of Industrial Organization, in: R. Schmalensee & R. Willig (ed.), Handbook of Industrial Organization, edition 1, volume 2, chapter 24, pages 1347-1447 Elsevier.
  13. Dasgupta, Partha & Hammond, Peter & Maskin, Eric, 1980. "On Imperfect Information and Optimal Pollution Control," Review of Economic Studies, Wiley Blackwell, vol. 47(5), pages 857-60, October.
  14. Gabel H. Landis & Sinclair-Desgagne Bernard, 1993. "Managerial Incentives and Environmental Compliance," Journal of Environmental Economics and Management, Elsevier, vol. 24(3), pages 229-240, May.
  15. Besanko, David, 1987. "Performance versus design standards in the regulation of pollution," Journal of Public Economics, Elsevier, vol. 34(1), pages 19-44, October.
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Citations

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Cited by:
  1. Anastasios Xepapadeas, 2011. "The Economics of Non-Point-Source Pollution," Annual Review of Resource Economics, Annual Reviews, vol. 3(1), pages 355-373, October.
  2. Aftab, Ashar & Hanley, Nick & Baiocchi, Giovanni, 2010. "Integrated regulation of nonpoint pollution: Combining managerial controls and economic instruments under multiple environmental targets," Ecological Economics, Elsevier, vol. 70(1), pages 24-33, November.
  3. Muller-Furstenberger, G. & Stephan, G., 1997. "Environmental policy and cooperation beyond the nation state: an introduction and overview," Structural Change and Economic Dynamics, Elsevier, vol. 8(1), pages 99-114, March.
  4. Karine Nyborg, 2000. "Voluntary Agreements and Non-Verifiable Emissions," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 17(2), pages 125-144, October.
  5. Schmutzler, Armin & Goulder, Lawrence H., 1997. "The Choice between Emission Taxes and Output Taxes under Imperfect Monitoring," Journal of Environmental Economics and Management, Elsevier, vol. 32(1), pages 51-64, January.
  6. Gerhard Clemenz, 1999. "Adverse Selection and Pigou Taxes," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 13(1), pages 13-29, January.
  7. Stefan Baumgärtner & Frank Jöst, 2000. "Joint Production, Externalities, and the Regulation of Production Networks," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 16(2), pages 229-251, June.

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