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Discretionary Exemptions from Environmental Regulation: Flexibility for Good or for Ill

Author

Listed:
  • Dietrich Earnhart
  • Sarah Jacobson
  • Yusuke Kuwayama
  • Richard T. Woodward

Abstract

Many environmental regulations impose limits on harmful activities but include discretionary “safety valve” provisions allowing the regulator to grant exemptions that provide relief to regulated parties. We construct a theoretical model and explore cases in which this discretion serves good or ill. We show that when a regulation is otherwise inflexible, exemptions can improve social welfare, and perhaps reduce pollution, by distributing abatement more cost-effectively across polluters. However, these beneficial predictions rely on an unconstrained, fully informed, and benevolent regulator. In other cases, exemptions may not offer such gains; further, the discretionary nature of exemptions allows them to be abused.

Suggested Citation

  • Dietrich Earnhart & Sarah Jacobson & Yusuke Kuwayama & Richard T. Woodward, 2023. "Discretionary Exemptions from Environmental Regulation: Flexibility for Good or for Ill," Land Economics, University of Wisconsin Press, vol. 99(2), pages 203-221.
    • Handle: RePEc:uwp:landec:v:99:y:2023:i:2:p:203-221
    Note: DOI: https://doi.org/10.3368/le.052520-0071R1
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    JEL classification:

    • D62 - Microeconomics - - Welfare Economics - - - Externalities
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy

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