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Optimal Fines for Environmental Noncompliance Under a Decentralized Enforcement Policy

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Author Info
Laurent Franckx () (K.U.Leuven, C.E.S., Energy, Transport and Environment, Royal Military Academy)

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Abstract

We consider the determination of the optimal fine for noncompliance by a legislator who anticipates the inspection game between an autonomous inspection agency and polluting firms. This agency can make the inspection of individual firms contingent on ambient pollution. The agency's autonomy implies that it cannot commit itself to announced inspection probabilities. If the legislator centralizes the decision to monitor ambient pollution, the optimal fine is infinitely large. The legislator can then forbid ambient inspections to avoid overenforcement. If the legislator decentralizes the decision to monitor ambient pollution, overenforcement can be avoided by choosing a finite fine.

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File URL: http://www.econ.kuleuven.ac.be/ew/academic/energmil/downloads/ete-wp01-08.pdf
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Publisher Info
Paper provided by Katholieke Universiteit Leuven, Centrum voor Economische Studiën, Energy, Transport and Environment in its series Energy, Transport and Environment Working Papers Series with number ete0108.

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Length: 34 pages
Date of creation: Feb 2001
Date of revision:
Handle: RePEc:ete:etewps:ete0108

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Web page: http://www.econ.kuleuven.be/ew/academic/energmil
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Related research
Keywords: decentralized environmental enforcement; optimal penalties;

Find related papers by JEL classification:
K42 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Illegal Behavior and the Enforcement of Law
Q20 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - General

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This page was last updated on 2009-12-5.

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