Tailored Regulation: Will Voluntary Site-Specific Environmental Performance Standards Improve Welfare?

38 Pages Posted: 8 Nov 2000

See all articles by Allen Blackman

Allen Blackman

Inter-American Development Bank (IDB)

James Boyd

Resources for the Future

Date Written: November 2000

Abstract

Increasingly popular tailored regulation (TR) initiatives like EPA's Project XL allow plants to voluntarily substitute site-specific environmental performance standards for command-and-control regulations that dictate pollution abatement strategies. TR can significantly reduce participants' costs of complying with environmental regulations. But in doing so, it can also provide participants with a competitive advantage. We show that this can have undesirable welfare consequences when it enables relatively inefficient firms in oligopolistic markets to "steal" market share from more efficient firms. One critical determinant of whether or not TR has such adverse welfare impacts is the regulator's policy regarding the diffusion of TR agreements among non-participating firms.

Keywords: Tailored regulation, voluntary regulation, site-specific, performance standards, regulatory reform

JEL Classification: Q28, L13, L51, K32

Suggested Citation

Blackman, Allen and Boyd, James William, Tailored Regulation: Will Voluntary Site-Specific Environmental Performance Standards Improve Welfare? (November 2000). FEEM Working Paper No. 76.2000. Available at SSRN: https://ssrn.com/abstract=249273 or http://dx.doi.org/10.2139/ssrn.249273

Allen Blackman (Contact Author)

Inter-American Development Bank (IDB) ( email )

1300 New York Avenue NW
Washington, DC 20577
United States

James William Boyd

Resources for the Future ( email )

1616 P Street, NW
Washington, DC 20036
United States
202-328-5013 (Phone)
202-939-3460 (Fax)

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