On the Possibility of a Cost-effective Choice of Noncompliance by Environmental Regulators: Experimental Evidence of Firms’ Behavior
RFF Academic Seminar
Marcelo Caffera, Universidad de Montevideo
Theoretical models show that it is cost effective to induce perfect compliance in pollution control programs that cap emissions at a certain level, as opposed to design the program such that the total level of emissions is the same but the regulation is violated. This fundamental result is based on the possibility that a regulator has of inducing each individual firm to emit the same level of pollution by changing the aggregate supply of emission permits (or the emission standards) and the monitoring probability accordingly. In this paper we present experimental evidence against this hypothesis based on a series of laboratory experiments. Contrary to what theory predicts, our experiments suggest that a regulator cannot manipulate the supply of permits (or the emission standards) and the monitoring probability accordingly so as to induce the same level of individual emissions when the policy induces compliance as when it induces violations.
Tuesday, October 23, 2012
12:00 - 1:00 p.m.
Lunch will be provided.
7th Floor Conference Room
1616 P St. NW
Washington, DC 20036
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