On Environmental Policy and Permitting

22 Pages Posted: 11 Dec 2007

See all articles by Philippe Bontems

Philippe Bontems

University of Toulouse 1 - Groupe de Recherche en Economie Mathématique et Quantitative (GREMAQ); French National Institute for Agricultural Research (INRA) - Mission Informatique

Jean-Marc Bourgeon

French National Institute for Agricultural Research (INRA) - UMR Economie Publique; Ecole Polytechnique - Economic Department

Date Written: 2007-02-16

Abstract

The literature on environmental policy under adverse selection usually assumes that firms' profit vary monotonically with a private information parameter. However, it is easy to demonstrate using standard production setups that regularity is not the rule. We show that policy requirements are very sensitive to this assumption. In particular, the optimal instrument resembles more an adaptable pollution standard than the economic instrument of an environmental tax. We also show that permitting, which results in some firms over-investing in pollution-control equipment, does not serve the objective of improving the environment but rather allows the agency to increase the proceeds of the policy.

Suggested Citation

Bontems, Philippe and Bourgeon, Jean-Marc, On Environmental Policy and Permitting (2007-02-16). Journal of Public Economic Theory, Vol. 9, Issue 5, pp. 771-792, October 2007, Available at SSRN: https://ssrn.com/abstract=1067127 or http://dx.doi.org/10.1111/j.1467-9779.2007.00330.x

Philippe Bontems (Contact Author)

University of Toulouse 1 - Groupe de Recherche en Economie Mathématique et Quantitative (GREMAQ) ( email )

Manufacture des Tabacs
21 Allees de Brienne
Toulouse, 31000
France
(33) 05 61 12 85 22 (Phone)
(33) 05 61 12 85 20 (Fax)

French National Institute for Agricultural Research (INRA) - Mission Informatique ( email )

Toulouse School of Economics, INRA, Manufacture
des tabacs, Allée de Brienne
Toulouse, 31000
France
(33) 05 61 12 85 22 (Phone)
(33) 05 61 12 85 20 (Fax)

Jean-Marc Bourgeon

French National Institute for Agricultural Research (INRA) - UMR Economie Publique ( email )

Centre de Grignon
BP01
Thiverval-Grignon, 78850
France

Ecole Polytechnique - Economic Department ( email )

Palaiseau, 91128
France

HOME PAGE: http://www.polytechnique.edu

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