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Dynamic regulation of nonpoint source pollution when the number of emitters is large

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  • Tsur, Yacov
  • de Gorter, Harry
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    Abstract

    When a nonpoint source pollution process involves many polluters, each taking his own contribution to aggregate pollution to be negligible, ambient-based policies become ineffective due to lack of strategic interactions between dischargers. We offer a regulation mechanism for this case. The mechanism consists of inter-period and intra-period components. The first exploits ambient (aggregate) information to derive the optimal pollution and aggregate emission processes and the ensuing social price of emission. The intra-period mechanism takes as given the social price of emission and implements the optimal output-abatement-emission allocation across the heterogenous, privately informed firms in each time period. The mechanism gives rise to the full information outcome when the social cost of transfers is nil. A positive social cost of transfers decreases both output and abatement in each time period, though the effect on emission is ambiguous.

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    Bibliographic Info

    Paper provided by Hebrew University of Jerusalem, Department of Agricultural Economics and Management in its series Discussion Papers with number 122124.

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    Date of creation: 2012
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    Handle: RePEc:ags:huaedp:122124

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    Postal: Faculty of Agriculture, Food and Environmental Quality Sciences Hebrew University of Jerusalem, P.O. Box 12, Rehovot 76100
    Phone: 08-9481230
    Fax: 08-9466267
    Web page: http://departments.agri.huji.ac.il/economics/indexe.html
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    Related research

    Keywords: Nonpoint source pollution; abatement; stock externality; dynamic regulation; Markov decision process; asymmetric information; Crop Production/Industries; C61; D82; H23; L51; Q58;

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