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Non-Verifiable Emissions, Voluntary Agreements, and Emission Taxes



This paper demonstrates that voluntary agreements between a regulator and an industry can be Pareto superior to environmental taxes. Further, such agreements may differ from direct regulation in a non-trivial way. The first-best optimum may be included in the set of possible agreements, even if it is not attainable using tax instruments. There is no uncertainty or asymmetric information in the model. However, it is assumed that some emissions are observable, but not verifiable. This may be interpreted as a situation where precise formal specification of the pollutant is infeasible.

Suggested Citation

  • Karine Nyborg, 1998. "Non-Verifiable Emissions, Voluntary Agreements, and Emission Taxes," Discussion Papers 214, Statistics Norway, Research Department.
  • Handle: RePEc:ssb:dispap:214

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    Voluntary agreements; Second-best tax; Non-verifiability;

    JEL classification:

    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • L52 - Industrial Organization - - Regulation and Industrial Policy - - - Industrial Policy; Sectoral Planning Methods
    • Q28 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Government Policy


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