The dynamics of optimal environmental regulation

Beavis, Brian; Dobbs, Ian M.

doi:10.1016/0165-1889(86)90005-9

Cited by 21 publications

(16 citation statements)

References 3 publications

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“…Fines for non-compliance are not specifically modelled, since it is assumed that the firm complies with the standard once the regulatory period starts. Our paper is similar to Beavis and Dobbs (1986) in two respects. First, we share a similar spirit, which calls for the social convenience of polluters' gradual adaptation to new environmental regulations.…”

Section: Introductionsupporting

confidence: 65%

“…Regarding the literature that considers dynamic problems of regulatory standard setting assuming perfect compliance, Beavis and Dobbs (1986) is probably the first study of this kind.…”

Section: Introductionmentioning

confidence: 99%

“…4 In the dynamic context, the endogenous determination of the regulatory standards and the monitoring and enforcement issues have been considered separately in the literature. 5 On the one hand, all the papers that deal with standard setting assume perfect compliance and, therefore, abstract from modeling inspection frequencies and fines for non-compliance. On the other hand, all the papers that deal with dynamic enforcement do so assuming exogenous (or constant overtime) regulatory regimes.…”

Section: Introductionmentioning

confidence: 99%

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Optimal Pollution Standards and Non-compliance in a Dynamic Framework

Arguedas

Cabo

Martín‐Herrán

2016

Environ Resource Econ

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In this paper we present a Stackelberg differential game to study the dynamic interaction between a polluting firm and a regulator who sets pollution limits overtime. At each time, the firm settles emissions taking into account the fine for non-compliance with the pollution limit, and balances current costs of investments in a capital stock which allows for future emission reductions. We derive two main results. First, we show that the optimal pollution limit decreases as the capital stock increases, while both emissions and the level of noncompliance decrease. Second, we find that offering fine discounts in exchange for firm's capital investment is socially desirable. We numerically obtain the optimal value of such discount, which crucially depends on the severity of the fine. In the limiting scenario with a very large severity of the fine, the optimal discount implies that no penalties are levied, since the firm shows adequate adaptation progress through capital investment.

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Section: Introductionsupporting

confidence: 65%

“…Regarding the literature that considers dynamic problems of regulatory standard setting assuming perfect compliance, Beavis and Dobbs (1986) is probably the first study of this kind.…”

Section: Introductionmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

See 1 more Smart Citation

Optimal Pollution Standards and Non-compliance in a Dynamic Framework

Arguedas

Cabo

Martín‐Herrán

2016

Environ Resource Econ

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“…Then, the regulator optimization problem becomes a optimal control problem where the optimal tax rate maximizes social welfare: private bene…ts of emissions minus environmental damages. 3 This approach has been adopted by Hoel and 3 In Benford (1998) and Baudry (2000) the objective of the regulator is to minimize the sum of abatement costs and environmental damages. Benford (1998) describes a scheme for the control of a stock pollutant that is both incentive compatible and induces e¢ ciency.…”

Section: Introductionmentioning

confidence: 99%

“…The seminal paper is Beavis and Dobbs (1986). They solve a policy game where the regulator decides the standard and the time at which it comes into force to minimize the sum of environmental damages and …rm's adjustment costs in a model where the level of a ‡ow pollutant depends on the abatement capital stock.…”

Section: Introductionmentioning

confidence: 99%

The Strategic Use of Abatement by a Polluting Monopoly

Martín‐Herrán

Rubio

2016

SSRN Journal

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This paper evaluates the e¤ects of the lack of regulatory commitment on emission tax applied by the regulator, abatement e¤ort made by the monopoly and social welfare comparing two alternative policy games. The …rst game assumes that the regulator commits to an ex-ante level of the emission tax. In the second one, in a …rst stage the regulator and the monopolist simultaneously choose the emission tax and abatement respectively, and in a second stage the monopolist selects the output level. We …nd that the lack of commitment leads to lower taxation and abatement that yield larger emissions and, consequently, a larger steady-state pollution stock. Moreover, the increase of environmental damages because of the increase in the pollution stock more than compensates the increase in consumer surplus and the decrease in abatement costs resulting in a reduction of social welfare. Thus, our analysis indicates that the lack of commitment has a negative impact of welfare although this detrimental e¤ect decreases with abatement costs.

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On the Dynamics of the Regulation of Pollution: Incentive Compatible Regulation of a Persistent Pollutant

Benford

1998

Journal of Environmental Economics and Management

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The dynamics of optimal environmental regulation

Cited by 21 publications

References 3 publications

Optimal Pollution Standards and Non-compliance in a Dynamic Framework

Optimal Pollution Standards and Non-compliance in a Dynamic Framework

The Strategic Use of Abatement by a Polluting Monopoly

On the Dynamics of the Regulation of Pollution: Incentive Compatible Regulation of a Persistent Pollutant

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