Multi Pollutant Yardstick Schemes as Environmental Policy Tools
AbstractWe consider environmental regulation of n risk-averse, multiple pollutant firms. We develop a “yardstick competition” scheme where the regulatory scheme depends on the di erence between a firm’s “aggregate” performance and the average “aggregate” performance of the industry. Whether this instruments dominates Pigovian taxation depends on the complete structure of the covariance matrix of the “common” random terms in measured pollution. Moreover, if the number of firms is large enough, the “yardstick scheme” is always superior to Pigovian taxation. This analysis also provides new arguments in favor of strict liability rather than negligence liability as regulatory tool.
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Bibliographic InfoPaper 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 ete0416.
Length: 19 pages
Date of creation: 2004
Date of revision:
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yardstick competition; multitasking; environmental regulation; asymmetric information;
This paper has been announced in the following NEP Reports:
- NEP-ALL-2005-01-16 (All new papers)
- NEP-ENE-2005-01-16 (Energy Economics)
- NEP-ENV-2005-01-16 (Environmental Economics)
- NEP-MIC-2005-01-16 (Microeconomics)
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