Optimal Enforcement Policy and Firms’ Emissions and Compliance with Environmental Taxes∗
نویسندگان
چکیده
In a market where firms with different characteristics decide upon both the level of emissions and their reports, we study the optimal audit policy for an enforcement agency whose objective is to minimize the level of emissions. We show that it is optimal to devote the resources primarily to the easiest-to-monitor firms and to those firms that value pollution the less. Moreover, unless the budget for monitoring is very large, there are always firms that do not comply with the environmental objective and others that do comply; but all of them evade the environmental taxes. JEL Classification numbers: K32, K42, D82.
منابع مشابه
The Optimal Pricing of Pollution When Enforcement is Costly
We consider the pricing of a uniformly mixed pollutant with a model of optimal, possibly firm-specific, emissions taxes and their enforcement under incomplete information about firms’ abatement costs, enforcement costs, and pollution damage. We argue that optimality requires an enforcement strategy that induces full compliance by every firm, except possibly when a regulator can base the probabi...
متن کاملEnvironmental Regulation: Choice of Instruments under Imperfect Compliance∗
Compliance is an important issue in environmental regulation. We discuss some of the key elements of the problem and analyze a situation where emissions are not random and firms are risk-neutral. We study the firm’s decision on emissions and compliance when the environmental regulation is based on standards and the enforcement agency audits the firm with a certain probability. We compare total ...
متن کاملMonitoring and Enforcement of Environmental Policy
This article reviews the economics literature on monitoring and enforcement of environmental policy. In the last few years there has been a rapid growth in both theoretical developments and empirical studies of monitoring and enforcement. Various factors have contributed to this growth, including (1) the growth of the law and economics literature and its interest in issues of law enforcement an...
متن کاملThe cost effectiveness of environmental policy instruments in the presence of imperfect compliance
We aim to integrate information, monitoring and enforcement costs into the choice of environmental policy instruments. We use a static partial equilibrium framework to study different combinations of regulatory instruments (taxes, standards...) and enforcement instruments (criminal fine, administrative fine...). The firms’ compliance decisions depend on the instrument combination selected by th...
متن کاملThe relative efficiency of environmental policy instruments in a second-best setting with costly monitoring and enforcement
In this paper we in corporate monitoring and enforcement aspects in the choice of environmental policy instruments in a general equilibrium framework. Goulder et al. (JPE, 1999) look into the choice of policy instruments in the presence of distortionary taxes. We extend this model by no longer assuming full compliance from the firms. A violating firm is caught with a certain probability by the ...
متن کامل