The choice of policy instruments to control pollution under costly enforcement and incomplete information
We analyze the cost of enforcing a system of firm specific emissions standards vis a vis a transferable emissions permit system in the context of complete and incomplete information. We also examine the optimality of a transferable emissions permit system when abatement costs and enforcement costs are considered. We show that under incomplete information, regulation based on each firm-specific emissions standards cannot be less costly than a transferable emissions permit system. In addition, we find that the distribution of emissions that minimize aggregate program costs differ from the distribution of emissions generated by a competitive transferable emissions permit system.
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Volume (Year): 12 (2009)
Issue (Month): (November)
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