The regulatory choice of noncompliance in emissions trading programs

Stranlund, John K.

doi:10.1007/s10640-006-9058-3

Cited by 57 publications

(37 citation statements)

References 29 publications

Supporting

Mentioning

Contrasting

Order By: Relevance

“…However, the effect of permit price on the decision to misreport production is small, and only significant in stage 2. By contrast, Stranlund (2006 and2007) and Cason and Gangadharan (2006) found significantly negative impacts of permit prices on compliance.…”

Section: Individual Production and Compliance Choicesmentioning

confidence: 76%

“…3 Another theoretical contribution in this area is Innes (2003), but he simplifies his analysis by assuming that enforcement consists only of a certain permit violation penalty. The theoretical literature on compliance and enforcement in emissions trading using static models is extensive (including contributions by Keeler 1991, Malik 1990, 1992, and 2002, vanEgteren and Weber 1996, Stranlund and Chavez 2000, Chavez and Stranlund 2003, Stranlund 2007. 4 Requiring self-reporting and making misreporting a distinct violation is different from most of the economic literature on self-reporting in law enforcement.…”

Section: Introductionmentioning

confidence: 99%

See 1 more Smart Citation

An Experimental Analysis of Compliance in Dynamic Emissions Markets

2010

View full text Add to dashboard Cite

Abstract:Two important design elements for emission trading programs are whether and to what extent firms are able to bank emissions permits, and how these programs are to be enforced. In this paper we present results from laboratory emissions markets designed to investigate enforcement and compliance when these markets allow permit banking. Banking is motivated by a decrease in the aggregate permit supply in the middle of multi-period trading sessions. Consistent with theoretical insights, our experiments suggest that high permit violation penalties have little deterrence value in dynamic emissions markets, and that the main challenge of enforcing these programs is to motivate truthful self-reports of emissions. Abstract: Two important design elements for emission trading programs are whether and to what extent firms are able to bank emissions permits, and how these programs are to be enforced. In this paper we present results from laboratory emissions markets designed to investigate enforcement and compliance when these markets allow permit banking. Banking is motivated by a decrease in the aggregate permit supply in the middle of multi-period trading sessions. Consistent with theoretical insights, our experiments suggest that high permit violation penalties have little deterrence value in dynamic emissions markets, and that the main challenge of enforcing these programs is to motivate truthful self-reports of emissions.

show abstract

Section: Individual Production and Compliance Choicesmentioning

confidence: 76%

Section: Introductionmentioning

confidence: 99%

An Experimental Analysis of Compliance in Dynamic Emissions Markets

2010

View full text Add to dashboard Cite

show abstract

“…Macho-Stadler and Perez-Castrillo (2006) analyze the optimal enforcement policy in the context of per-unit emission taxes. Further analysis has also been conducted on cap-and-trade programs (Keeler 1991, Macho-Stadler 2006, Malik 1990, Stranlund and Chavez 2000, Stranlund et al 2005, Stranlund 2007. 1 Yet, the literature on credit-based systems is sparse.…”

Section: Introductionmentioning

confidence: 99%

Optimal monitoring of credit-based emissions trading under asymmetric information

MacKenzie

Ohndorf

2012

J Regul Econ

View full text Add to dashboard Cite

Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in EconStor may AbstractProject-based emissions trading schemes, like the Clean Development Mechanism, are particularly prone to problems of asymmetric information between project parties and the regulator. In this paper, we extend the general framework on incomplete enforcement of policy instruments to reflect the particularities of credit-based mechanisms. The main focus of the analysis is to determine the regulator's optimal spot-check frequency given plausible assumptions of incomplete enforcement under asymmetric information on reduction costs and heterogeneous verifiability of projects. We find that, depending on the actual abatement cost and penalty schemes, optimal monitoring for credit-based systems is often discontinuous and significantly differs from the one to be applied for cap-andtrade schemes or environmental taxes. We conclude that, in a real-world context, project admission should ultimately be based on the criterion of verifiability.

show abstract

“…Stranlund (2007) considers the joint determination of an emissions trading program and its enforcement in the cost-effective achievement of an aggregate emissions standard. He demonstrates that when regulators are fully informed about firms' abatement costs, to reach an exogenous aggregate target the optimal policy calls for inducing full compliance.…”

Section: Introductionmentioning

confidence: 99%

Should We Impose Emissions Taxes that Firms Evade?

Stranlund

2010

SSRN Journal

View full text Add to dashboard Cite

Abstract:Most of the theoretical literature on enforcing environmental policies focuses on situations in which pollution sources are noncompliant. However, some recent work suggests that these situations will very often involve suboptimal policy designs. Thus, the circumstances under which it is efficient to implement policies that do not motivate full compliance appear to be more limited than most of the literature would imply. In this paper, I identify several circumstances under which regulators may conserve enforcement costs by implementing emissions taxes that firms evade. I demonstrate that a regulator can use a firm's tax evasion to reduce monitoring effort, but only if its monitoring strategy can be made an increasing function of the firm's emissions, if the probability of sanctioning a violation is increasing in the size of the violation, or if the firm's manager is risk averse. Whether an optimal tax/enforcement policy should allow noncompliance under these circumstances depends on the value of reduced monitoring effort set against the increase in expected sanctioning costs, and the costs of dealing with the added regulatory uncertainty that is produced by imperfect compliance. Abstract: Most of the theoretical literature on enforcing environmental policies focuses on situations in which pollution sources are noncompliant. However, some recent work suggests that these situations will very often involve suboptimal policy designs. Thus, the circumstances under which it is efficient to implement policies that do not motivate full compliance appear to be more limited than most of the literature would imply. In this paper, I identify several circumstances under which regulators may conserve enforcement costs by implementing emissions taxes that firms evade. I demonstrate that a regulator can use a firm's tax evasion to reduce monitoring effort, but only if its monitoring strategy can be made an increasing function of the firm's emissions, if the probability of sanctioning a violation is increasing in the size of the violation, or if the firm's manager is risk averse. Whether an optimal tax/enforcement policy should allow noncompliance under these circumstances depends on the value of reduced monitoring effort set against the increase in expected sanctioning costs, and the costs of dealing with the added regulatory uncertainty that is produced by imperfect compliance.

show abstract

The regulatory choice of noncompliance in emissions trading programs

Cited by 57 publications

References 29 publications

An Experimental Analysis of Compliance in Dynamic Emissions Markets

An Experimental Analysis of Compliance in Dynamic Emissions Markets

Optimal monitoring of credit-based emissions trading under asymmetric information

Should We Impose Emissions Taxes that Firms Evade?

Contact Info

Product

Resources

About