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Transaction Costs, Economic Instruments And Environmental Policies

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  • Herath, Deepananda P.B.
  • Weersink, Alfons

Abstract

This study has attempted to distinguish the alternative forms of transaction costs referred to the environmental policy literature and to bring these transaction costs into a unified theory. The optimal choice of economic instrument between Pigouvian taxes and tradable permits is shown to depend on the level of transaction costs as opposed to the standard model where both emission taxes and permits are first best policies to achieve a level of emissions. It is demonstrated that inclusion of transaction costs decreases the socially optimal emission level as compared to the standard model. Instrument selection is affected by the functional specification for instrument costs for both firm and regulator level. Depending on the nature of these costs optimal economic instruments will be different.

Suggested Citation

  • Herath, Deepananda P.B. & Weersink, Alfons, 1999. "Transaction Costs, Economic Instruments And Environmental Policies," 1999 Annual meeting, August 8-11, Nashville, TN 21588, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    • Handle: RePEc:ags:aaea99:21588
    DOI: 10.22004/ag.econ.21588
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    References listed on IDEAS

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    Cited by:

    1. Gordon, Simon, 2003. "Economic Instruments For Nonpoint Source Water Pollution: Options For The Swan-Canning River System," 2003 Conference (47th), February 12-14, 2003, Fremantle, Australia 57873, Australian Agricultural and Resource Economics Society.
    2. Jahan Dideh, Mahsa, 2016. "Essays on public economics," Other publications TiSEM 955f607d-b1ac-4680-b8ff-6, Tilburg University, School of Economics and Management.

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