Regulation via the Polluter-Pays Principle
AbstractWe consider the problem of regulating an economy with environmental pollution. We examine the distributional impact of the polluter-pays principle which requires that any agent compensates all other agents for the damages caused by his or her (pollution) emissions. With constant marginal damages we show that regulation via the polluter-pays principle leads to the unique welfare distribution that assigns non-negative individual welfare and renders each agent responsible for his or her pollution impact. We extend both the polluter-pays principle and this result to increasing marginal damages due to pollution. We also discuss the acceptability of the polluter-pays principle and compare it with the Vickrey-Clark-Groves mechanism.
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Bibliographic InfoPaper provided by LERNA, University of Toulouse in its series LERNA Working Papers with number 10.18.324.
Date of creation: Dec 2010
Date of revision:
Other versions of this item:
- AMBEC, Stefan & EHLERS, Lars, 2011. "Regulation via the Polluter-Pays Principle," Cahiers de recherche 2011-01, Universite de Montreal, Departement de sciences economiques.
- AMBEC, Stefan & EHLERS, Lars, 2011. "Regulation via the Polluter-Pays Principle," Cahiers de recherche 01-2011, Centre interuniversitaire de recherche en économie quantitative, CIREQ.
- C7 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory
- D02 - Microeconomics - - General - - - Institutions: Design, Formation, and Operations
- D30 - Microeconomics - - Distribution - - - General
- D6 - Microeconomics - - Welfare Economics
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