IDEAS home Printed from https://ideas.repec.org/a/kap/itaxpf/v16y2009i1p25-42.html
   My bibliography  Save this article

The relative efficiency of market-based environmental policy instruments with imperfect compliance

Author

Listed:
  • Sandra Rousseau

    ()

  • Stef Proost

Abstract

This paper examines to what extent incomplete compliance of environmental regulation mitigates the distortions caused by pre-existing labour taxes. We study the relative cost efficiency of three market-based instruments: emission taxes, tradable permits and output taxes. In a first-best setting and given that monitoring and enforcement is costless, we find that the same utility levels can be reached with and without incomplete compliance. However, allowing for violations makes the policy instruments less effective. The nominal tax rate needs to be higher or the number of permits issued smaller, in order to obtain the required emission reduction. Including monitoring and enforcement aspects, and more specifically fines, into the model in a second-best setting, provides us with a new means of collecting tax revenues and of lessening existing tax distortions. We show that the relative position of grandfathered tradable permits vis-à-vis emission taxes improves considerably when allowing for incomplete compliance in a second-best setting
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • 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.
  • Handle: RePEc:kap:itaxpf:v:16:y:2009:i:1:p:25-42 DOI: 10.1007/s10797-007-9043-y
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1007/s10797-007-9043-y
    Download Restriction: Access to full text is restricted to subscribers.

    As the access to this document is restricted, you may want to look for a different version below or search for a different version of it.

    Other versions of this item:

    References listed on IDEAS

    as
    1. Mayeres, Inge & Proost, Stef, 2001. "Marginal tax reform, externalities and income distribution," Journal of Public Economics, Elsevier, vol. 79(2), pages 343-363, February.
    2. Montero, Juan-Pablo, 2002. "Prices versus quantities with incomplete enforcement," Journal of Public Economics, Elsevier, vol. 85(3), pages 435-454, September.
    3. Harford, Jon D., 1978. "Firm behavior under imperfectly enforceable pollution standards and taxes," Journal of Environmental Economics and Management, Elsevier, vol. 5(1), pages 26-43, March.
    4. 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.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. 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.
    2. 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.
    3. repec:spr:envpol:v:19:y:2017:i:2:d:10.1007_s10018-016-0166-1 is not listed on IDEAS
    4. 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.

    More about this item

    Keywords

    Environmental policy instruments; Monitoring and enforcement; General equilibrium model; D5; H23; K42; Q58;

    JEL classification:

    • D5 - Microeconomics - - General Equilibrium and Disequilibrium
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • K42 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Illegal Behavior and the Enforcement of Law
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:kap:itaxpf:v:16:y:2009:i:1:p:25-42. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Sonal Shukla) or (Rebekah McClure). General contact details of provider: http://www.springer.com .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.