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The use of warnings when intended and measured emissions differ

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Author Info
Rousseau Sandra () (K.U.Leuven-Center for Economic Studies)

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Abstract

This article studies the effects of informal, non-monetary sanctions, such as warnings, which are often used as an enforcement instrument by environmental inspection agencies. In cases of uncertainty with respect to the measured emissions due to measurement errors or accidental violations, some firms are unjustly penalised. As warnings provide a buffer period in which the firm is informed about the violation without any monetary consequences, it will be theoretically shown that warnings can help to reduce the welfare cost of such type II-errors and reduce the overdeterrence of low-cost firms - albeit at the cost of underdeterring medium-cost firms.

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File URL: http://www.econ.kuleuven.ac.be/ew/academic/energmil/downloads/ete-wp-2005-08.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 ete0508.

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Length: 24 pages
Date of creation: Dec 2005
Date of revision:
Handle: RePEc:ete:etewps:ete0508

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Web page: http://www.econ.kuleuven.be/ew/academic/energmil
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Related research
Keywords: Enforcement; non-monetary sanctions; warnings; measurement errors;

Find related papers by JEL classification:
Q38 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Government Policy (includes OPEC Policy)
K42 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Illegal Behavior and the Enforcement of Law

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References listed on IDEAS
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  1. Nyborg, Karine & Telle, Kjetil, 2004. "The role of warnings in regulation: keeping control with less punishment," Journal of Public Economics, Elsevier, vol. 88(12), pages 2801-2816, December. [Downloadable!] (restricted)
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  2. Gray, Wayne B. & Deily, Mary E., 1996. "Compliance and Enforcement: Air Pollution Regulation in the U.S. Steel Industry," Journal of Environmental Economics and Management, Elsevier, vol. 31(1), pages 96-111, July. [Downloadable!] (restricted)
  3. A. Mitchell Polinsky & Steven Shavell, 2000. "The Economic Theory of Public Enforcement of Law," Journal of Economic Literature, American Economic Association, vol. 38(1), pages 45-76, March. [Downloadable!] (restricted)
    Other versions:
  4. Sandra Rousseau, 2007. "Timing of environmental inspections: survival of the compliant," Journal of Regulatory Economics, Springer, vol. 32(1), pages 17-36, August. [Downloadable!] (restricted)
    Other versions:
  5. Stafford, Sarah L., 2002. "The Effect of Punishment on Firm Compliance with Hazardous Waste Regulations," Journal of Environmental Economics and Management, Elsevier, vol. 44(2), pages 290-308, September. [Downloadable!] (restricted)
  6. Shavell, Steven, 1987. "The Optimal Use of Nonmonetary Sanctions as a Deterrent," American Economic Review, American Economic Association, vol. 77(4), pages 584-92, September. [Downloadable!] (restricted)
  7. Harrington, Winston, 1988. "Enforcement leverage when penalties are restricted," Journal of Public Economics, Elsevier, vol. 37(1), pages 29-53, October. [Downloadable!] (restricted)
  8. Chu, C. Y. Cyrus & Hu, Sheng-cheng & Huang, Ting-yuan, 2000. "Punishing repeat offenders more severely," International Review of Law and Economics, Elsevier, vol. 20(1), pages 127-140, March. [Downloadable!] (restricted)
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