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Certification as a Rationale for Voluntary Agreements

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  • Gonzalez, Patrick

Abstract

I model the participation of firms in a voluntary agreement as a costly certification process whereby a firm informs the Regulator of its pollution intensity. Without this knowledge, the Regulator imposes the same tax on all firms in a heterogeneous industry, unduly hurting the clean ones with the lowest intensity. Certification allows clean firms to get a tax rebate. It also entails an informational externality as the dispersion of types decreases within the pool of non-participating firms, following an unraveling process. Because participation is a firm’s private decision, there is such a thing as a bad voluntary agreement.

Suggested Citation

  • Gonzalez, Patrick, 2011. "Certification as a Rationale for Voluntary Agreements," Working Papers 117827, University of Laval, Center for Research on the Economics of the Environment, Agri-food, Transports and Energy (CREATE).
    • Handle: RePEc:ags:ulavwp:117827
    DOI: 10.22004/ag.econ.117827
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    References listed on IDEAS

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    1. Simon Ashby & Swee-Hoon Chuah & Robert Hoffmann, 2004. "Industry Self-Regulation: A Game-Theoretic Typology of Strategic Voluntary Compliance," International Journal of the Economics of Business, Taylor & Francis Journals, vol. 11(1), pages 91-106.
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    3. Na Li Dawson & Kathleen Segerson, 2008. "Voluntary Agreements with Industries: Participation Incentives with Industry-Wide Targets," Land Economics, University of Wisconsin Press, vol. 84(1), pages 97-114.
    4. Segerson, Kathleen & Miceli, Thomas J., 1998. "Voluntary Environmental Agreements: Good or Bad News for Environmental Protection?," Journal of Environmental Economics and Management, Elsevier, vol. 36(2), pages 109-130, September.
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    More about this item

    Keywords

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    JEL classification:

    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
    • Q53 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Air Pollution; Water Pollution; Noise; Hazardous Waste; Solid Waste; Recycling
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy

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