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Colluding Against Environmental Regulation

Author

Listed:
  • Ale-Chilet, Jorge
  • Chen, Cuicui
  • Li, Jing
  • Reynaert, Mathias

Abstract

We study collusion among firms against imperfectly monitored environmental regulation. Firms increase variable profits by violating regulation and reduce expected noncompliance penalties by violating jointly. We consider a case of three German automakers colluding to reduce the effectiveness of emissions control technology. By estimating a structural model of the European automobile industry from 2007 to 2018, we find that collusion lowers expected noncompliance penalties substantially and increases buyer and producer surplus. Due to increased pollution, welfare decreases by e 1.57–5.57 billion. We show how environmental policy design and antitrust play complementary roles in preventing noncompliance.

Suggested Citation

  • Ale-Chilet, Jorge & Chen, Cuicui & Li, Jing & Reynaert, Mathias, 2021. "Colluding Against Environmental Regulation," TSE Working Papers 21-1204, Toulouse School of Economics (TSE).
    • Handle: RePEc:tse:wpaper:125488
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    2. Haijuan Yan & Xiaofei Hu & Jinliang Chen, 2025. "Effect of eco-compensation policy on the environmental quality varies with city size and location in China’s Yangtze river economic belt," Environment, Development and Sustainability: A Multidisciplinary Approach to the Theory and Practice of Sustainable Development, Springer, vol. 27(12), pages 29913-29940, December.
    3. Mohapatra, Debashrita & Lopez, Rigoberto & Steinbach, Sandro, 2025. "Mergers, store revenue, and jobs: Evidence from the food retail industry," 2025 AAEA & WAEA Joint Annual Meeting, July 27-29, 2025, Denver, CO 360970, Agricultural and Applied Economics Association.
    4. Kastoryano, Stephen & Vollaard, Ben, 2022. "Nautical Patrol and Illegal Fishing Practices," Discussion Paper 2022-016, Tilburg University, Center for Economic Research.
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    6. Kastoryano, Stephen & Vollaard, Ben, 2023. "Unseen annihilation: Illegal fishing practices and nautical patrol," Journal of Environmental Economics and Management, Elsevier, vol. 122(C).
    7. Qiang Tu & Limei Zuo & Jianlei Mo & Yingnan Wang, 2026. "Carbon pricing, green innovation, and production efficiency—new evidence from China," Mitigation and Adaptation Strategies for Global Change, Springer, vol. 31(3), pages 1-32, March.
    8. Jiajun Xu & Rui Li & Xiaojun Yang, 2026. "Intellectual Property Protection and Synergizing the Reduction of Pollution and Carbon Emissions: Evidence from a Quasi-Natural Experiment," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), vol. 17(1), pages 1094-1116, February.
    9. Qiang Wu & Yuhao Chen & Aoxue Wang, 2026. "Decarbonizing global value chains: the dual role of manufacturing servitization in export-implied carbon emissions – scale expansion vs. structural upgrading," Mitigation and Adaptation Strategies for Global Change, Springer, vol. 31(2), pages 1-29, February.
    10. Xiaoxu Kong & Xinxu Zhang & Chuanli Wang, 2025. "Does environmental pollution liability insurance promote corporate green innovation? Empirical evidence from china’s high-polluting industries," Environment, Development and Sustainability: A Multidisciplinary Approach to the Theory and Practice of Sustainable Development, Springer, vol. 27(9), pages 23027-23049, September.
    11. Pascal Heid & Kevin Remmy & Mathias Reynaert, 2024. "Equilibrium Effects in Complementary Markets: Electric Vehicle Adoption and Electricity Pricing," CRC TR 224 Discussion Paper Series crctr224_2024_615, University of Bonn and University of Mannheim, Germany.
    12. Ying She & Guoliang Liu & Ling Jia & Yangu Deng & Liyuan Zhang, 2023. "Spatial-temporal Evolution of Global Aircraft Production Network: Evidence from 1741 Global Aircraft Firms," Review of Economic Assessment, Anser Press, vol. 2(1), pages 40-53, April.
    13. Chenruo Zhang & Yuchen Bi & Zijie Jiang & Xiaoru Shen, 2023. "Hometown CEOs and Pollution Emissions: Evidence from Chinese Listed Companies," Advances in Management and Applied Economics, SCIENPRESS Ltd, vol. 13(6), pages 1-5.
    14. Wenwen Li & Shuo Fang & Chenran Yan & Qian Li & Weifeng Gong & Chuanhui Wang, 2026. "Impact of corporate financialization on carbon cost efficiency of thermal power enterprises in China," Environment, Development and Sustainability: A Multidisciplinary Approach to the Theory and Practice of Sustainable Development, Springer, vol. 28(1), pages 2595-2630, January.
    15. de Boon, Auvikki & Sandström, Camilla & Rose, David Christian, 2022. "Perceived legitimacy of agricultural transitions and implications for governance. Lessons learned from England’s post-Brexit agricultural transition," Land Use Policy, Elsevier, vol. 116(C).
    16. Jiangnan Wu & Xuebo Zhang & Zhihao He & Bingkun Lu, 2025. "The effect of digital inclusive finance on the development of the green economy in china: A panel data analysis," Environment, Development and Sustainability: A Multidisciplinary Approach to the Theory and Practice of Sustainable Development, Springer, vol. 27(12), pages 29075-29103, December.
    17. Lopez, Rigoberto A. & Mohapatra, Debashrita & Steinbach, Sandro, 2024. "Mergers, store locations, and jobs: Evidence from the food retail industry," 2024 Annual Meeting, July 28-30, New Orleans, LA 343711, Agricultural and Applied Economics Association.

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    JEL classification:

    • L4 - Industrial Organization - - Antitrust Issues and Policies
    • L5 - Industrial Organization - - Regulation and Industrial Policy
    • L6 - Industrial Organization - - Industry Studies: Manufacturing
    • Q5 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics

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