Optimal environmental regulation based on more than just emissions
AbstractI develop a principal-agent model of environmental regulation in which the regulator can acquire two costly signals of the firm’s abatement effort. Acquisition of the second signal is conditioned on the observed value of the first, emissions signal. The optimal contract takes the form of an emissions standard when only the emissions signal is acquired, and a set of contingent emissions standards when both signals are acquired; the standards are coupled with uniform, maximal penalties for noncompliance. Acquisition of the second signal may be optimal when intermediate values of the first signal are observed but not when extreme values are observed. Copyright Springer Science+Business Media, LLC 2007
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Bibliographic InfoArticle provided by Springer in its journal Journal of Regulatory Economics.
Volume (Year): 32 (2007)
Issue (Month): 1 (August)
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Web page: http://www.springerlink.com/link.asp?id=100298
Environmental regulation; Enforcement; Optimal auditing; Q58; L51; K42;
Find related papers by JEL classification:
- Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy
- L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
- K42 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Illegal Behavior and the Enforcement of Law
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