Abstract
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 emissions when environmental regulation is based on different instruments: standards, taxes, and tradable permits. We show that when compliance is an issue, environmental taxes are superior to the other instruments, and we analyze the (static) efficiency of the solution. © 2007 Springer-Verlag.
| Original language | English |
|---|---|
| Pages (from-to) | 1-21 |
| Journal | Spanish Economic Review |
| Volume | 10 |
| DOIs | |
| Publication status | Published - 1 Mar 2008 |
Keywords
- Audits and compliance
- Environmental instruments
- Environmental regulation