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

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  • Michel Cavagnac

Abstract

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.

Suggested Citation

  • Michel Cavagnac, 2003. "Environmental standard setting by a supra-regional authority: customisation or convergence?," European Review of Agricultural Economics, Foundation for the European Review of Agricultural Economics, vol. 30(4), pages 415-437, December.
  • Handle: RePEc:oup:erevae:v:30:y:2003:i:4:p:415-437
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    References listed on IDEAS

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    1. Jean-Jacques Laffont & David Martimort, 1999. "Separation of Regulators Against Collusive Behavior," RAND Journal of Economics, The RAND Corporation, pages 232-262.
    2. 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.
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    7. Jean-Jacques Laffont & David Martimort, 1999. "Separation of Regulators Against Collusive Behavior," RAND Journal of Economics, The RAND Corporation, pages 232-262.
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    10. 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, pages 121-139.
    11. 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.
    12. Marcel Boyer & Donatella Porrini, 2000. "Law versus Regulation: A Political Economy Model of Instrument Choice in Environmental Policy," CIRANO Working Papers 2000s-57, CIRANO.
    13. Laffont, Jean-Jacques, 1996. "Industrial policy and politics," International Journal of Industrial Organization, Elsevier, vol. 14(1), pages 1-27.
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    Cited by:

    1. François DESTANDAU & Anne ROZAN & Sandrine SPAETER, 2014. "Supra-Regional vs. Regional Regulators in the Water Pollution Mitigation: Optimal Exemption Policies," Working Papers of BETA 2014-09, Bureau d'Economie Théorique et Appliquée, UDS, Strasbourg.

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