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Environmental standard setting by a supra-regional authority: customisation or convergence?

Listed author(s):
  • Michel Cavagnac

The paper studies the fixing of environmental standards by a supra-regional (e.g. European) authority when regional authorities have private information about local conditions. Institutionally, the standard-setting body is not authorised to levy taxes on the regions. We show that the elicitation of private information may require weaker environmental standards (i.e. higher pollution allowances) than the first-best solution. In this case, the social cost of the informational rent left to the region, in the form of increased pollution, can be such that bunching is optimal (the standards are less closely customised to region-specific conditions). In the extreme, the informational cost can be such that it is optimal to disregard the regional characteristics and to require convergence. Copyright 2003, Oxford University Press.

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Article provided by Foundation for the European Review of Agricultural Economics in its journal European Review of Agricultural Economics.

Volume (Year): 30 (2003)
Issue (Month): 4 (December)
Pages: 415-437

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Handle: RePEc:oup:erevae:v:30:y:2003:i:4:p:415-437
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  1. Tracy R. Lewis, 1996. "Protecting the Environment When Costs and Benefits Are Privately Known," RAND Journal of Economics, The RAND Corporation, vol. 27(4), pages 819-847, Winter.
  2. Myerson, Roger B, 1979. "Incentive Compatibility and the Bargaining Problem," Econometrica, Econometric Society, vol. 47(1), pages 61-73, January.
  3. Jean-Jacques Laffont & David Martimort, 1999. "Separation of Regulators Against Collusive Behavior," RAND Journal of Economics, The RAND Corporation, vol. 30(2), pages 232-262, Summer.
  4. Juan Bárcena-ruiz & María Garzón, 2003. "Strategic Environmental Standards, Wage Incomes and the Location of Polluting Firms," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 24(2), pages 121-139, February.
  5. Laffont, Jean-Jacques, 1996. "Industrial policy and politics," International Journal of Industrial Organization, Elsevier, vol. 14(1), pages 1-27.
  6. Caillaud, B. & Jullien, B. & Picard, P., 1996. "National vs European incentive policies: Bargaining, information and coordination," European Economic Review, Elsevier, vol. 40(1), pages 91-111, January.
  7. Jean-Jacques Laffont & Jean Tirole, 1993. "A Theory of Incentives in Procurement and Regulation," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262121743, July.
  8. R. Damania, 1999. "Political Competition, Rent Seeking and the Choice of Environmental Policy Instruments," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 13(4), pages 415-433, June.
  9. Gilbert, Guy & Picard, Pierre, 1996. "Incentives and optimal size of local jurisdictions," European Economic Review, Elsevier, vol. 40(1), pages 19-41, January.
  10. Marcel Boyer & Jean-Jacques Laffont, 1999. "Toward a Political Theory of the Emergence of Environmental Incentive Regulation," RAND Journal of Economics, The RAND Corporation, vol. 30(1), pages 137-157, Spring.
  11. Partha Dasgupta & Peter Hammond & Eric Maskin, 1979. "The Implementation of Social Choice Rules: Some General Results on Incentive Compatibility," Review of Economic Studies, Oxford University Press, vol. 46(2), pages 185-216.
  12. Ulph, Alistair, 2000. "Harmonization and Optimal Environmental Policy in a Federal System with Asymmetric Information," Journal of Environmental Economics and Management, Elsevier, vol. 39(2), pages 224-241, March.
  13. Marcel Boyer & Donatella Porrini, 2000. "Law versus Regulation: A Political Economy Model of Instrument Choice in Environmental Policy," CIRANO Working Papers 2000s-57, CIRANO.
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