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Comparing Environmental Policy Instruments in the Presence of Imperfect Compliance – A Case Study

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  • Sandra Rousseau

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  • Stef Proost

Abstract

In this paper, we aim to include rule making, implementation, monitoring and enforcement costs into the cost comparison of policy instruments. We use a simple partial equilibrium model and apply it to the textile industry. The model includes discrete abatement functions and costly monitoring and enforcement. The case study uses individual firm data to simulate the differences in abatement costs and compliance decisions between firms. We compare combinations of regulatory instruments (emission taxes, emission standards and technology standards) and enforcement instruments (criminal fines, civil fines and transaction offers). We show that the inclusion of information, monitoring and enforcement costs indeed alters the relative cost efficiency of the different instruments. Copyright Springer 2005

Suggested Citation

  • Sandra Rousseau & Stef Proost, 2005. "Comparing Environmental Policy Instruments in the Presence of Imperfect Compliance – A Case Study," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 32(3), pages 337-365, November.
  • Handle: RePEc:kap:enreec:v:32:y:2005:i:3:p:337-365
    DOI: 10.1007/s10640-005-6646-6
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    References listed on IDEAS

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    1. Sandra Rousseau & Stef Proost, 2009. "The relative efficiency of market-based environmental policy instruments with imperfect compliance," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 16(1), pages 25-42, February.
    2. Sandra Rousseau & Carole M. Billiet, 2003. "Using emission standards under incomplete compliance," Energy, Transport and Environment Working Papers Series ete0303, KU Leuven, Department of Economics - Research Group Energy, Transport and Environment.
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    Citations

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    Cited by:

    1. Sandra Rousseau & Stef Proost, 2009. "The relative efficiency of market-based environmental policy instruments with imperfect compliance," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 16(1), pages 25-42, February.
    2. Jussi Lankoski & Erik Lichtenberg & Markku Ollikainen, 2010. "Agri-Environmental Program Compliance in a Heterogeneous Landscape," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 47(1), pages 1-22, September.
    3. Villegas, Clara & Coria, Jessica, 2009. "Taxes, Permits and the Adoption of Abatement Technology under Imperfect Compliance," Working Papers in Economics 368, University of Gothenburg, Department of Economics.
    4. Voßwinkel, Jan & Birg, Laura, 2015. "Minimum Quality Standards and Non-Compliance," Annual Conference 2015 (Muenster): Economic Development - Theory and Policy 112883, Verein für Socialpolitik / German Economic Association.
    5. Ellen Moons & Sandra Rousseau, 2005. "Policy design and the optimal location of forests in Flanders," Energy, Transport and Environment Working Papers Series ete0505, KU Leuven, Department of Economics - Research Group Energy, Transport and Environment.
    6. Clara Villegas-Palacio & Jessica Coria, 2010. "On the interaction between imperfect compliance and technology adoption: taxes versus tradable emissions permits," Journal of Regulatory Economics, Springer, vol. 38(3), pages 274-291, December.
    7. repec:spr:envpol:v:19:y:2017:i:2:d:10.1007_s10018-016-0166-1 is not listed on IDEAS
    8. Min Chen & Konstantinos Serfes, 2012. "Minimum quality standard regulation under imperfect quality observability," Journal of Regulatory Economics, Springer, vol. 41(2), pages 269-291, April.
    9. Edward B. Barbier, 2013. "Is a global crisis required to prevent climate change? A historical–institutional perspective," Chapters,in: Handbook on Energy and Climate Change, chapter 28, pages 598-614 Edward Elgar Publishing.
    10. Vanassche, Stella & Vranken, Liesbet & Vercaemst, Peter, 2009. "The impact of environmental policy on industrial sectors: empirical evidence from 14 European Countries," Working Papers 2009/20, Hogeschool-Universiteit Brussel, Faculteit Economie en Management.
    11. Jessica Coria & Clara Villegas-Palacio, 2014. "Regulatory Dealing: Technology Adoption Versus Enforcement Stringency Of Emission Taxes," Contemporary Economic Policy, Western Economic Association International, vol. 32(2), pages 451-473, April.
    12. Rousseau, Sandra & Telle, Kjetil, 2010. "On the existence of the optimal fine for environmental crime," International Review of Law and Economics, Elsevier, vol. 30(4), pages 329-337, December.
    13. Meynaerts, Erika & Vanassche, Stella & Vranken, Liesbet, 2010. "A Normative Approach to Incorporate Affordability Criteria for Industrial Sectors in the Design and Implementation of Environmental Policies: A Case Study Illustration," Working Papers 2010/07, Hogeschool-Universiteit Brussel, Faculteit Economie en Management.
    14. Florian Baumann & Tim Friehe, 2017. "Design standards and technology adoption: welfare effects of increasing environmental fines when the number of firms is endogenous," Environmental Economics and Policy Studies, Springer;Society for Environmental Economics and Policy Studies - SEEPS, vol. 19(2), pages 427-450, April.
    15. Arguedas, Carmen & Rousseau, Sandra, 2009. "A note on the complementarity of uniform emission standards and monitoring strategies," Working Papers 2009/12, Hogeschool-Universiteit Brussel, Faculteit Economie en Management.
    16. Pauli Lappi, 2016. "The welfare ranking of prices and quantities under noncompliance," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 23(2), pages 269-288, April.

    More about this item

    Keywords

    efficiency; environmental management; government policy; illegal behaviour and the enforcement of law; transaction costs; D23; D61; K42; Q2; Q28;

    JEL classification:

    • D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
    • D61 - Microeconomics - - Welfare Economics - - - Allocative Efficiency; Cost-Benefit Analysis
    • K42 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Illegal Behavior and the Enforcement of Law
    • Q2 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation
    • Q28 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Government Policy

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