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Regulation via the Polluter‐pays Principle

Author

Listed:
  • Stefan Ambec
  • Lars Ehlers

Abstract

We consider the problem of regulating an economy with environmental pollution. We examine the distributional impact of the polluter-pays principle which requires that any agent compensates all other agents for the damages caused by his or her (pollution) emissions. With constant marginal damages we show that regulation via the polluter-pays principle leads to the unique welfare distribution that assigns non-negative individual welfare and renders each agent responsible for his or her pollution impact. We extend both the polluter-pays principle and this result to increasing marginal damages due to pollution. We also discuss the acceptability of the polluter-pays principle and compare it with the Vickrey-Clark-Groves mechanism.
(This abstract was borrowed from another version of this item.)
(This abstract was borrowed from another version of this item.)
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • Stefan Ambec & Lars Ehlers, 2016. "Regulation via the Polluter‐pays Principle," Economic Journal, Royal Economic Society, vol. 126(593), pages 884-906, June.
    • Handle: RePEc:wly:econjl:v:126:y:2016:i:593:p:884-906
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    File URL: http://hdl.handle.net/10.1111/ecoj.2016.126.issue-593
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    Citations

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    Cited by:

    1. Ambec, Stefan, 2022. "The European Union’s Carbon Border Adjustment Mechanism: Challenges and Perspectives," TSE Working Papers 22-1365, Toulouse School of Economics (TSE).
    2. Ofosu, George & Arthur-Holmes, Francis, 2025. "Becoming a friend of the foe: The evolving perspectives on the ‘cohabitation’ strategies of large-scale and artisanal and small-scale mining operations," World Development, Elsevier, vol. 195(C).
    3. Abdul-Salam, Yakubu & Kemp, Alex & Phimister, Euan, 2022. "Energy transition in the UKCS – Modelling the effects of carbon emission charges on upstream petroleum operations," Energy Economics, Elsevier, vol. 108(C).
    4. Dieter Schmidtchen & Jenny Helstroffer & Christian Koboldt, 2021. "Regulatory failure and the polluter pays principle: why regulatory impact assessment dominates the polluter pays principle," Environmental Economics and Policy Studies, Springer;Society for Environmental Economics and Policy Studies - SEEPS, vol. 23(1), pages 109-144, January.
    5. Flori, Andrea & Scotti, Francesco, 2025. "When the intensity of trading meets compliance requirements: An assessment for firms operating within the EU ETS," Energy Economics, Elsevier, vol. 147(C).
    6. Ma, Guangcheng & Yang, Yang, 2025. "Can China’s carbon market policy promote inter-city green collaborative innovation?," Energy Economics, Elsevier, vol. 144(C).
    7. Athanasoglou, Stergios, 2022. "On the existence of efficient, individually rational, and fair environmental agreements," Journal of Mathematical Economics, Elsevier, vol. 98(C).
    8. Wang, Jianlong & Liu, Yong & Wang, Weilong & Wu, Haitao, 2024. "Does artificial intelligence improve enterprise carbon emission performance? Evidence from an intelligent transformation policy in China," Technology in Society, Elsevier, vol. 79(C).
    9. Gabriel, Cle-Anne & Bond, Carol, 2019. "Need, Entitlement and Desert: A Distributive Justice Framework for Consumption Degrowth," Ecological Economics, Elsevier, vol. 156(C), pages 327-336.
    10. Maogang Tang & Ruihan Zhang & Zhen Li & Baijun Wu, 2021. "Assessing the impact of tradable discharge permit on pollution reduction and innovation: micro-evidence from Chinese industrial enterprises," Environment, Development and Sustainability: A Multidisciplinary Approach to the Theory and Practice of Sustainable Development, Springer, vol. 23(11), pages 16911-16933, November.
    11. J. Walter Milon, 2019. "The polluter pays principle and Everglades restoration," Journal of Environmental Studies and Sciences, Springer;Association of Environmental Studies and Sciences, vol. 9(1), pages 67-81, March.
    12. Aleksandar Zaklan, 2023. "Coase and Cap-and-Trade: Evidence on the Independence Property from the European Carbon Market," American Economic Journal: Economic Policy, American Economic Association, vol. 15(2), pages 526-558, May.
    13. Seung Wan Kim & Michael G. Pollitt & Young Gyu Jin & Jip Kim & Yong Tae Yoon, 2017. "Contractual Framework for the Devolution of System Balancing Responsibility from the Transmission System Operator to Distribution System Operators," Working Papers EPRG 1715, Energy Policy Research Group, Cambridge Judge Business School, University of Cambridge.
    14. Jing, Zhongbo & Zhang, Wei & Zhao, Pengcheng & Zhao, Yang, 2025. "Environmental tax reform and corporate tax avoidance: A quasi-natural experiment on China’s environmental protection tax law," The North American Journal of Economics and Finance, Elsevier, vol. 76(C).
    15. Aleksandar Zaklan, 2020. "Coase and Cap-and-Trade: Evidence on the Independence Property from the European Electricity Sector," Discussion Papers of DIW Berlin 1850, DIW Berlin, German Institute for Economic Research.

    More about this item

    JEL classification:

    • C7 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory
    • D02 - Microeconomics - - General - - - Institutions: Design, Formation, Operations, and Impact
    • D30 - Microeconomics - - Distribution - - - General
    • D6 - Microeconomics - - Welfare Economics

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