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Standardized environmental management systems as an internal management tool

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  • Alonso-Paulí, Eduard
  • André, Francisco J.

Abstract

In a principal-agent model we analyze the firm's decision to adopt an informal or a standardized environmental management system (EMS). Our results are consistent with empirical evidence in several respects. A standardized EMS increases the internal control at the cost of introducing some degree of rigidity that entails an endogenous setup cost. Standardized systems are more prone to be adopted by big and well established firms and under tougher environmental policies. Firms with standardized EMS tend to devote more effort to abatement although this effort results in lower pollution only if public incentives are strong enough, suggesting a complementarity relationship between standardized EMS and public policies. Emission charges have both a marginal effect on abatement and a qualitative effect on the adoption decision that may induce a conflict between private and public interests. As a result of the combination of these two effects it can be optimal for the government to distort the tax in a specific way in order to push the firm to choose the socially optimal EMS. The introduction of standardized systems can result in win-win situations where firms, society and the environment get better off.

Suggested Citation

  • Alonso-Paulí, Eduard & André, Francisco J., 2015. "Standardized environmental management systems as an internal management tool," Resource and Energy Economics, Elsevier, vol. 40(C), pages 85-106.
  • Handle: RePEc:eee:resene:v:40:y:2015:i:c:p:85-106
    DOI: 10.1016/j.reseneeco.2015.02.001
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    References listed on IDEAS

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    More about this item

    Keywords

    Environmental management system; Asymmetric information; Emission charges; Principal-agent model;

    JEL classification:

    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation

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