Voluntary pollution abatement and regulation in the presence of a green market
AbstractWe present a model in which firms voluntarily abate emissions in a market that values environmental quality such that firms can charge a premium for goods that are environmentally friendly. Our results establish conditions under which mandatory abatement crowds out voluntary abatement, or, alternatively, provides an incentive for firms to increase their level of voluntary abatement in order to maintain product differentiation. In addition, we identify cases under which firms that do not abate voluntarily would support mandatory abatement if they are able to collectively pass off (at least part of) the costs of abatement to consumers. Our model predicts that regulatory policies that ignore voluntary abatement are likely to over-regulate non-abating firms compared to the level of regulation that accounts for voluntary abatement if consumer income levels in the green market are relatively high. If consumer income levels in the green market are relatively low, regulation may be ineffective in improving overall environmental quality.
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Bibliographic InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 25026.
Date of creation: 29 Jul 2010
Date of revision:
Voluntary Pollution Abatement; Regulation; Markup;
Find related papers by JEL classification:
- K32 - Law and Economics - - Other Substantive Areas of Law - - - Environmental, Health, and Safety Law
- Q52 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Pollution Control Costs; Distributional Effects; Employment Effects
- Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy
This paper has been announced in the following NEP Reports:
- NEP-ALL-2010-09-25 (All new papers)
- NEP-ENE-2010-09-25 (Energy Economics)
- NEP-ENV-2010-09-25 (Environmental Economics)
- NEP-LAW-2010-09-25 (Law & Economics)
- NEP-REG-2010-09-25 (Regulation)
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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