Delegating Pollution Permits

20 Pages Posted: 4 May 2020

See all articles by Tapas Kundu

Tapas Kundu

Oslo Business School, Oslo Metropolitan University; UiT the Arctic University of Norway

Tore Nilssen

University of Oslo - Department of Economics

Date Written: April 7, 2020

Abstract

We discuss the decision to delegate the regulation of pollution through sales of permits to a biased expert in a situation where the polluting firm has private information about its technology. We consider, in particular, constrained delegation where the government puts restrictions on the amount of pollution that the expert can sell permits for. We find that there is more delegation the higher is the probability of the firm being low-cost. This is not in line with the so-called uncertainty principle, implying that the delegation of a regulatory task works differently from that of other tasks considered in the delegation literature.

Keywords: Bureauracy; Delegation; Pollution standards; Permits

JEL Classification: D82, H23, L51, Q58

Suggested Citation

Kundu, Tapas and Nilssen, Tore, Delegating Pollution Permits (April 7, 2020). Available at SSRN: https://ssrn.com/abstract=3571348 or http://dx.doi.org/10.2139/ssrn.3571348

Tapas Kundu

Oslo Business School, Oslo Metropolitan University ( email )

Pilestredet 35
Oslo, 0167
Norway

HOME PAGE: http://www.tapaskundu.net

UiT the Arctic University of Norway ( email )

Breivika
Tromsø, NO-9037
Norway

HOME PAGE: http://www.tapaskundu.net

Tore Nilssen (Contact Author)

University of Oslo - Department of Economics ( email )

P.O. Box 1095 Blindern
N-0317 Oslo
Norway

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