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Commitment or no-commitment to monitoring in emission tax systems?

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  • Hsiao-Chi Chen
  • Shi-Miin Liu
  • Chiung-Yun Chang

Abstract

This paper analyzes and compares behaviors of regulators and polluting firms in emission tax systems with and without commitment to monitoring. In the commitment case, firms can be compliant or non-compliant at equilibria. Firms’ compliance implies that regulators will face the paradox of ex ante commitment to monitoring. However, we find that the commitment system is at least as efficient as the no-commitment system. This suggests that the commitment system has merit even the paradox of ex ante commitment may exist. Finally, relative magnitudes of firms’ optimal and reported emissions in the two systems are uncertain, unless their weights in the social cost function are greater than or equal to one. Relative values of equilibrium monitoring probabilities and fines in the two systems are also unsure. Copyright Springer 2013

Suggested Citation

  • Hsiao-Chi Chen & Shi-Miin Liu & Chiung-Yun Chang, 2013. "Commitment or no-commitment to monitoring in emission tax systems?," Environmental Economics and Policy Studies, Springer;Society for Environmental Economics and Policy Studies - SEEPS, vol. 15(2), pages 171-188, April.
    • Handle: RePEc:spr:envpol:v:15:y:2013:i:2:p:171-188
    DOI: 10.1007/s10018-012-0046-2
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    References listed on IDEAS

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    1. Yuyu Li & Bo Huang & Fengming Tao, 2016. "Pricing Mechanism Design for Centralized Pollutant Treatment with SME Alliances," IJERPH, MDPI, vol. 13(6), pages 1-13, June.

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    More about this item

    Keywords

    Commitment; Emission tax; Fine; Monitoring; No-commitment; Q50; Q58;
    All these keywords.

    JEL classification:

    • Q50 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - General
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy

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