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Tailored Regulation: Will Voluntary Site-Specific Performance Standards Necessarily Improve Welfare?

Author

Listed:
  • Blackman, Allen

    (Resources for the Future)

  • Boyd, James

    (Resources for the Future)

Abstract

Increasingly popular tailored regulation (TR) initiatives like EPA’s Project XL allow plants to voluntarily substitute site-specific environmental performance standards for command-and-control regulations that dictate pollution abatement strategies. TR can significantly reduce participants’ costs of complying with environmental regulations. But in doing so, it can also provide participants with a competitive advantage. We show that this can have undesirable welfare consequences when it enables relatively inefficient firms in oligopolistic markets to "steal" market share from more efficient firms. One critical determinant of whether or not TR has such adverse welfare impacts is the regulator’s policy regarding the diffusion of TR agreements among non-participating firms.

Suggested Citation

  • Blackman, Allen & Boyd, James, 1999. "Tailored Regulation: Will Voluntary Site-Specific Performance Standards Necessarily Improve Welfare?," RFF Working Paper Series dp-00-03-rev, Resources for the Future.
    • Handle: RePEc:rff:dpaper:dp-00-03-rev
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    References listed on IDEAS

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    Cited by:

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    4. Marcus Alexander & Matthew C. Harding & Department of Economics & MIT, 2003. "Self-regulation and the Certification of the European Information Economy The Case of e-Healthcare Information Provision," Economics Series Working Papers 154, University of Oxford, Department of Economics.

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