Self-Regulation, Taxation, and Public Voluntary Environmental Agreements
IU Kelley, School Dept. of Bus. Econ. & Public Policy Working Paper No. 00-12
60 Pages Posted: 21 Dec 2000
Date Written: November 1, 2000
An increasingly popular instrument for solving environmental problems is the "public voluntary agreement (VA)", in which government offers technical assistance and positive publicity to firms that reach certain environmental goals. Prior papers treat such agreements as a superior, low-cost instrument that can be used to preempt a threat of traditional, inefficient regulation. We present a more general model in which public VAs may instead be weak tools used when political opposition makes environmental taxes infeasible. We explore the conditions under which taxes, public VAs, and unilateral industry actions are to be expected, and the welfare implications of the various instruments. Notably, we also show that welfare may be reduced by the introduction of public VAs.
Keywords: self-regulation, public voluntary agreements, preemption
JEL Classification: D72, K32, L51, Q28
Suggested Citation: Suggested Citation