Optimal Enforcement Policy and Firms' Emissions and Compliance with Environmental Taxes

31 Pages Posted: 1 Jun 2004

See all articles by Ines Macho-Stadler

Ines Macho-Stadler

Universidad Autonoma de Barcelona; Barcelona Graduate School of Economics (Barcelona GSE); CESifo (Center for Economic Studies and Ifo Institute)

David Pérez-Castrillo

Universidad Autonoma de Barcelona; CESifo (Center for Economic Studies and Ifo Institute)

Date Written: May 2004

Abstract

In a market where firms with different characteristics decide upon both the level of emissions and their reports, we study the optimal audit policy for an enforcement agency whose objective is to minimize the level of emissions. We show that it is optimal to devote the resources primarily to the easiest-to-monitor firms and to those firms that value pollution the less. Moreover, unless the budget for monitoring is very large, there are always firms that do not comply with the environmental objective and others that do comply; but all of them evade the environmental taxes.

Keywords: environmental taxes, optimal audit policy

JEL Classification: K32, K42, D82

Suggested Citation

Macho-Stadler, Ines and Pérez-Castrillo, David, Optimal Enforcement Policy and Firms' Emissions and Compliance with Environmental Taxes (May 2004). Available at SSRN: https://ssrn.com/abstract=553941

Ines Macho-Stadler (Contact Author)

Universidad Autonoma de Barcelona ( email )

Departamento de Economia e Historia Economica
08193 Barcelona
Spain

Barcelona Graduate School of Economics (Barcelona GSE) ( email )

Ramon Trias Fargas, 25-27
Barcelona, Barcelona 08005
Spain

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

David Pérez-Castrillo

Universidad Autonoma de Barcelona ( email )

Edifici B - Campus Bellaterra
Barcelona, 08193
Spain
(34 93) 381 1405 (Phone)
(34 93) 581 2012 (Fax)

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

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