Using emission standards under incomplete compliance
Using the case study of water pollution in the Flemish textile industry, we discuss three empirical questions concerning the use of emission standards. We find that the Becker result ("maximal fine / minimal inspection") does not hold if we include rule making, implementation and enforcement costs into the model. There is a balance between the fine and the inspection variables. Making enforcement more stringent does not mean to put the fine levels as high as possible and only then increase the inspections. We have also shown that is extremely important to have correct estimates of people's willingness to pay for environmental improvement. These WTP estimates determine in great part the optimal environmental strategy and its associated optimal monitoring and enforcement policy. Moreover, it really pays off to optimise the monitoring and enforcement strategy associated with an emission standard. This optimisation does not necessarily mean that monitoring and enforcement should be as stringent as possible. It is often possible to obtain the desired result by some intermediate value of the monitoring and enforcement parameters. This is due to the balancing of costs and benefits associated with monitoring and enforcement.
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