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Multi Pollutant Yardstick Schemes as Environmental Policy Tools

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Author Info

  • Laurent Franckx

    ()
    (Department of Economics and Management, Royal Military Academy)

  • Alessio D’Amato†, Isabelle Brose

    ()
    (University of Rome “Tor Vergata”)

  • Isabelle Brose

    ()
    (Department of Economics and Management, Royal Military Academy)

Abstract

We 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 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 ete0416.

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Length: 19 pages
Date of creation: 2004
Date of revision:
Handle: RePEc:ete:etewps:ete0416

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Related research

Keywords: yardstick competition; multitasking; environmental regulation; asymmetric information;

This paper has been announced in the following NEP Reports:

References

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Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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  1. Laurent Franckx & Isabelle Brose & Alessio DAmato, 2004. "Multitask Rank Order Tournaments," Economics Bulletin, AccessEcon, vol. 10(10), pages 1-10.
  2. A. Mitchell Polinsky & Steven Shavell, 1999. "The Economic Theory of Public Enforcement of Law," NBER Working Papers 6993, National Bureau of Economic Research, Inc.
  3. repec:ebl:ecbull:v:10:y:2004:i:10:p:1-10 is not listed on IDEAS
  4. Edward P. Lazear & Sherwin Rosen, 1979. "Rank-Order Tournaments as Optimum Labor Contracts," NBER Working Papers 0401, National Bureau of Economic Research, Inc.
  5. Jean Tirole & Jean-Jaques Laffont, 1985. "Using Cost Observation to Regulate Firms," Working papers 368, Massachusetts Institute of Technology (MIT), Department of Economics.
  6. Malcomson, James M, 1984. "Work Incentives, Hierarchy, and Internal Labor Markets," Journal of Political Economy, University of Chicago Press, vol. 92(3), pages 486-507, June.
  7. Segerson, Kathleen, 1988. "Uncertainty and incentives for nonpoint pollution control," Journal of Environmental Economics and Management, Elsevier, vol. 15(1), pages 87-98, March.
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Citations

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Cited by:
  1. Ian Mackenzie & Nick Hanley & Tatiana Kornienko, 2008. "The optimal initial allocation of pollution permits: a relative performance approach," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 39(3), pages 265-282, March.

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