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Optimal Design of a Politically Feasible Environmental Regulation

Author

Listed:
  • Jongmin Yu

    (Hongik University)

  • Seokjong Ryu

    (Shanghai University of Finance and Economics)

Abstract

This paper discusses the optimal environmental regulation model that considers the political support of the regulated agents. We suggest a hybrid emission control policy pair, which combines a price (penalty) and a quantity control (emissions cap), and is efficient from the regulator’s perspective. Regulated companies choose one of the lowest-cost policy options within the pool of efficient hybrid policy pairs, and the regulator also prefers the most popular policy option with the smallest political resistance from the industry. This theoretic analysis provides an opportunity for policymakers to design acceptable regulation structures.

Suggested Citation

  • Jongmin Yu & Seokjong Ryu, 2018. "Optimal Design of a Politically Feasible Environmental Regulation," Korean Economic Review, Korean Economic Association, vol. 34, pages 75-99.
    • Handle: RePEc:kea:keappr:ker-20180101-34-1-04
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    References listed on IDEAS

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    More about this item

    Keywords

    Emission Trading; Price and Quantity; Hybrid Emission Control; Climate Change; Policy Instrument Choice;
    All these keywords.

    JEL classification:

    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
    • Q28 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Government Policy

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