IDEAS home Printed from https://ideas.repec.org/a/wly/navres/v62y2015i3p228-247.html
   My bibliography  Save this article

Environmental regulation in project‐based industries

Author

Listed:
  • Gökçe Esenduran
  • Nicholas G. Hall
  • Zhixin Liu

Abstract

We study the environmental regulation of industrial activities that are organized as projects. Applications arise in construction, ship and aircraft building, and film making, among other industries. Relative to manufacturing, environmental regulation is different in project‐based industries, due to the uniqueness and geographical diversity of projects, and a lack of product takeback programs. Because the amount of waste and pollution generated by project companies can be large, regulators need environmental policies to ensure reduction of waste and pollution. We consider a regulator who attempts to maximize social welfare. We model this problem as a bilevel nonlinear program. The upper level regulator specifies waste reduction targets, which the lower level project companies meet using waste stream reduction and remediation of pollution, while attempting to control their project costs. We find that high waste diversion targets lead to outcomes with little pollution, but excessive project costs and only modest waste stream reduction. Projects that have lower task precedence density, or that have pollutants with different environmental impacts, show larger increases in project cost and time resulting from regulation. We describe a subsidy for waste stream reduction that coordinates the system, and we estimate the value of coordination. We also describe a bonus that encourages truthful reporting by project companies, and evaluate the relative cost and effectiveness of the subsidy and the bonus. © 2015 Wiley Periodicals, Inc. Naval Research Logistics 62: 228–247, 2015

Suggested Citation

  • Gökçe Esenduran & Nicholas G. Hall & Zhixin Liu, 2015. "Environmental regulation in project‐based industries," Naval Research Logistics (NRL), John Wiley & Sons, vol. 62(3), pages 228-247, April.
    • Handle: RePEc:wly:navres:v:62:y:2015:i:3:p:228-247
    DOI: 10.1002/nav.21625
    as

    Download full text from publisher

    File URL: https://doi.org/10.1002/nav.21625
    Download Restriction: no
    File URL: https://libkey.io/10.1002/nav.21625?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Margaret Walls & Paul Calcott, 2000. "Can Downstream Waste Disposal Policies Encourage Upstream "Design for Environment"?," American Economic Review, American Economic Association, vol. 90(2), pages 233-237, May.
    2. Rainer Kolisch & Arno Sprecher & Andreas Drexl, 1995. "Characterization and Generation of a General Class of Resource-Constrained Project Scheduling Problems," Management Science, INFORMS, vol. 41(10), pages 1693-1703, October.
    3. Maurice D. Levi & Barrie R. Nault, 2004. "Converting Technology to Mitigate Environmental Damage," Management Science, INFORMS, vol. 50(8), pages 1015-1030, August.
    4. Chapple, Wendy & Paul, Catherine J. Morrison & Harris, Richard, 2005. "Manufacturing and corporate environmental responsibility: cost implications of voluntary waste minimisation," Structural Change and Economic Dynamics, Elsevier, vol. 16(3), pages 347-373, September.
    5. Walls, Margaret & Palmer, Karen, 2001. "Upstream Pollution, Downstream Waste Disposal, and the Design of Comprehensive Environmental Policies," Journal of Environmental Economics and Management, Elsevier, vol. 41(1), pages 94-108, January.
    6. Özge .Ic{s}legen & Stefan Reichelstein, 2011. "Carbon Capture by Fossil Fuel Power Plants: An Economic Analysis," Management Science, INFORMS, vol. 57(1), pages 21-39, January.
    7. Brucker, Peter & Drexl, Andreas & Mohring, Rolf & Neumann, Klaus & Pesch, Erwin, 1999. "Resource-constrained project scheduling: Notation, classification, models, and methods," European Journal of Operational Research, Elsevier, vol. 112(1), pages 3-41, January.
    8. Unold, Wolfram & Requate, Till, 2001. "Pollution control by options trading," Economics Letters, Elsevier, vol. 73(3), pages 353-358, December.
    9. Walls, Margaret & Hanson, Jean, 1999. "Distributional Aspects of an Environmental Tax Shift: The Case of Motor Vehicle Emissions Taxes," National Tax Journal, National Tax Association;National Tax Journal, vol. 52(1), pages 53-65, March.
    10. William Vickrey, 1961. "Counterspeculation, Auctions, And Competitive Sealed Tenders," Journal of Finance, American Finance Association, vol. 16(1), pages 8-37, March.
    11. F. Brian Talbot, 1982. "Resource-Constrained Project Scheduling with Time-Resource Tradeoffs: The Nonpreemptive Case," Management Science, INFORMS, vol. 28(10), pages 1197-1210, October.
    12. Partha Dasgupta & Peter Hammond & Eric Maskin, 1980. "On Imperfect Information and Optimal Pollution Control," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 47(5), pages 857-860.
    13. Edward W. Davis & George E. Heidorn, 1971. "An Algorithm for Optimal Project Scheduling under Multiple Resource Constraints," Management Science, INFORMS, vol. 17(12), pages 803-816, August.
    14. Benoît Colson & Patrice Marcotte & Gilles Savard, 2007. "An overview of bilevel optimization," Annals of Operations Research, Springer, vol. 153(1), pages 235-256, September.
    15. Palmer, Karen & Walls, Margaret, 1997. "Optimal policies for solid waste disposal Taxes, subsidies, and standards," Journal of Public Economics, Elsevier, vol. 65(2), pages 193-205, August.
    16. Evan Kwerel, 1977. "To Tell the Truth: Imperfect Information and Optimal Pollution Control," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 44(3), pages 595-601.
    17. Walls, Margaret & Hanson, Jean, 1999. "Distributional Aspects of an Environmental Tax Shift: The Case of Motor Vehicle Emissions Taxes," National Tax Journal, National Tax Association, vol. 52(n. 1), pages 53-65, March.
    18. Edward Clarke, 1971. "Multipart pricing of public goods," Public Choice, Springer, vol. 11(1), pages 17-33, September.
    19. Groves, Theodore, 1973. "Incentives in Teams," Econometrica, Econometric Society, vol. 41(4), pages 617-631, July.
    20. Dobos, Imre & Richter, Knut, 2004. "An extended production/recycling model with stationary demand and return rates," International Journal of Production Economics, Elsevier, vol. 90(3), pages 311-323, August.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Dan Zhuge & Shuaian Wang & Lu Zhen & Gilbert Laporte, 2021. "Subsidy design in a vessel speed reduction incentive program under government policies," Naval Research Logistics (NRL), John Wiley & Sons, vol. 68(3), pages 344-358, April.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Shrestha, Ratna K., 2017. "Menus of price-quantity contracts for inducing the truth in environmental regulation," Journal of Environmental Economics and Management, Elsevier, vol. 83(C), pages 1-7.
    2. John Duggan & Joanne Roberts, 2002. "Implementing the Efficient Allocation of Pollution," American Economic Review, American Economic Association, vol. 92(4), pages 1070-1078, September.
    3. Ollikka, Kimmo, 2014. "Essays on auction mechanisms and information in regulating pollution," Research Reports 66, VATT Institute for Economic Research.
    4. Kolisch, R. & Padman, R., 2001. "An integrated survey of deterministic project scheduling," Omega, Elsevier, vol. 29(3), pages 249-272, June.
    5. Ollikka, Kimmo, 2014. "Essays on auction mechanisms and information in regulating pollution," Research Reports P66, VATT Institute for Economic Research.
    6. Dominik Kress & Sebastian Meiswinkel & Erwin Pesch, 2018. "Mechanism design for machine scheduling problems: classification and literature overview," OR Spectrum: Quantitative Approaches in Management, Springer;Gesellschaft für Operations Research e.V., vol. 40(3), pages 583-611, July.
    7. Lewis, David J. & Polasky, Stephen, 2018. "An auction mechanism for the optimal provision of ecosystem services under climate change," Journal of Environmental Economics and Management, Elsevier, vol. 92(C), pages 20-34.
    8. Tafreshian, Amirmahdi & Masoud, Neda, 2022. "A truthful subsidy scheme for a peer-to-peer ridesharing market with incomplete information," Transportation Research Part B: Methodological, Elsevier, vol. 162(C), pages 130-161.
    9. Mishra, Debasis & Parkes, David C., 2007. "Ascending price Vickrey auctions for general valuations," Journal of Economic Theory, Elsevier, vol. 132(1), pages 335-366, January.
    10. Mizukami, Hideki & Saijo, Tatsuyoshi & Wakayama, Takuma, 2003. "Strategy-Proof Sharing," Working Papers 1170, California Institute of Technology, Division of the Humanities and Social Sciences.
    11. William H. Sandholm, 2005. "Negative Externalities and Evolutionary Implementation," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 72(3), pages 885-915.
    12. Acuff, Kaylee & Kaffine, Daniel T., 2013. "Greenhouse gas emissions, waste and recycling policy," Journal of Environmental Economics and Management, Elsevier, vol. 65(1), pages 74-86.
    13. Soumyakanti Chakraborty & Anup K. Sen & Amitava Bagchi, 2015. "Addressing the valuation problem in multi-round combinatorial auctions," Information Systems Frontiers, Springer, vol. 17(5), pages 1145-1160, October.
    14. Toyotaka Sakai, 2017. "Considering Collective Choice: The Route 328 Problem in Kodaira City," The Japanese Economic Review, Japanese Economic Association, vol. 68(3), pages 323-332, September.
    15. JunJie Wu & Bruce Babcock, 2001. "Spatial Heterogeneity and the Choice of Instruments to Control Nonpoint Pollution," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 18(2), pages 173-192, February.
    16. , & ,, 2015. "Strategy-proofness and efficiency with non-quasi-linear preferences: a characterization of minimum price Walrasian rule," Theoretical Economics, Econometric Society, vol. 10(2), May.
    17. d'Aspremont, Claude & Cremer, Jacques & Gerard-Varet, Louis-Andre, 2004. "Balanced Bayesian mechanisms," Journal of Economic Theory, Elsevier, vol. 115(2), pages 385-396, April.
    18. Hiroki Saitoh & Shigehiro Serizawa, 2008. "Vickrey allocation rule with income effect," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 35(2), pages 391-401, May.
    19. Numata, Daisuke, 2009. "Economic analysis of deposit–refund systems with measures for mitigating negative impacts on suppliers," Resources, Conservation & Recycling, Elsevier, vol. 53(4), pages 199-207.
    20. Takashi Kunimoto & Cuiling Zhang, 2021. "On incentive compatible, individually rational public good provision mechanisms," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 57(2), pages 431-468, August.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:wly:navres:v:62:y:2015:i:3:p:228-247. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wiley Content Delivery (email available below). General contact details of provider: https://doi.org/10.1002/(ISSN)1520-6750 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.