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The Effect of Allowing Pollution Offsets with Imperfect Enforcement

15 Pages Posted: 11 Sep 2010  

Hilary Sigman

Rutgers University - Department of Economics; National Bureau of Economic Research (NBER)

Howard F. Chang

University of Pennsylvania Law School

Multiple version iconThere are 2 versions of this paper

Date Written: September 9, 2010

Abstract

Several pollution control regimes, including climate change policies, allow polluters in one sector subject to an emissions cap to offset excessive emissions in that sector with pollution abatement in another sector. The government may often find it more costly to verify offset claims than to verify compliance with emissions caps, and concerns about difficulties in enforcement may lead regulators to restrict the use of offsets. In this paper, we demonstrate that allowing offsets may increase pollution abatement and reduce illegal pollution, even if the government has a fixed enforcement budget. We explore the circumstances that may make it preferable to allow offsets when enforcement is costly.

Keywords: Environmental Law and Economics, Climate Change, Emission Trading System

JEL Classification: K32, K42, Q53, Q54

Suggested Citation

Sigman, Hilary and Chang, Howard F., The Effect of Allowing Pollution Offsets with Imperfect Enforcement (September 9, 2010). University of Pennsylvania Institute for Law & Economics Research Paper No. 10-18. Available at SSRN: https://ssrn.com/abstract=1674913 or http://dx.doi.org/10.2139/ssrn.1674913

Hilary A. Sigman

Rutgers University - Department of Economics ( email )

75 Hamilton Street
New Brunswick, NJ 08901
United States

HOME PAGE: http://econweb.rutgers.edu/sigman

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Howard F. Chang (Contact Author)

University of Pennsylvania Law School ( email )

3501 Sansom Street
Philadelphia, PA 19104
United States
215-573-8296 (Phone)
215-573-2025 (Fax)

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