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Environmental Policy Instruments: Technology Adoption Incentives with Imperfect Compliance

Author

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  • Arguedas, Carmen

    (Departamento de Análisis Económico (Teoría e Historia Económica). Universidad Autónoma de Madrid.)

  • Camacho, Eva

    (Universidad Jaume I de Castellón)

  • Zofío, José Luis

    (Departamento de Análisis Económico (Teoría e Historia Económica). Universidad Autónoma de Madrid.
    Departamento de Análisis Económico: Teoría e Historia Económica. Universidad Autónoma de Madrid)

Abstract

In this paper, we study the incentives to adopt advanced abatement technologies in the presence of imperfect compliance. Surprisingly, incentives to adopt advanced abatement technologies remain intact under emission taxes and pollution abatement subsidies when compared to the perfect compliance scenario. However, under emission standards imperfect compliance increases firms’ incentives to invest under certain assumptions, whereas under an emission permit mechanism investment incentives decrease only if widespread non-compliance induces a (sufficient) reduction in the permit price. Our results are valid for fairly general characteristics of the monitoring and enforcement strategies commonly found in both, theoretical and empirical applications.

Suggested Citation

  • Arguedas, Carmen & Camacho, Eva & Zofío, José Luis, 2009. "Environmental Policy Instruments: Technology Adoption Incentives with Imperfect Compliance," Working Papers in Economic Theory 2009/03, Universidad Autónoma de Madrid (Spain), Department of Economic Analysis (Economic Theory and Economic History).
    • Handle: RePEc:uam:wpaper:200903
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    References listed on IDEAS

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    Cited by:

    1. Keisaku Higashida, 2019. "Burden of Inspection Costs and Effectiveness of Environmental Regulations," Discussion Paper Series 189, School of Economics, Kwansei Gakuin University.
    2. Lidia Vidal-Meliá & Carmen Arguedas & Eva Camacho-Cuena & José Luis Zofío, 2022. "An Experimental Analysis of the Effects of Imperfect Compliance on Technology Adoption," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 81(3), pages 425-451, March.
    3. Voßwinkel, Jan & Birg, Laura, 2015. "Minimum Quality Standards and Non-Compliance," VfS Annual Conference 2015 (Muenster): Economic Development - Theory and Policy 112883, Verein für Socialpolitik / German Economic Association.
    4. Angelo Antoci & Simone Borghesi & Gianluca Iannucci & Paolo Russu, 2020. "Emission permits, innovation and sanction in an evolutionary game," Economia Politica: Journal of Analytical and Institutional Economics, Springer;Fondazione Edison, vol. 37(2), pages 525-546, July.
    5. Ping Lin & Yu Pang, 2020. "Command-and-control regulation, incentive for pollution abatement, and market structure," Journal of Regulatory Economics, Springer, vol. 57(2), pages 159-180, April.
    6. Carmen Arguedas, 2013. "Pollution standards, technology investment and fines for non-compliance," Journal of Regulatory Economics, Springer, vol. 44(2), pages 156-176, October.
    7. Alfred Endres & Tim Friehe & Bianca Rundshagen, 2020. "Diffusion and adoption of advanced emission abatement technology induced by permit trading," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 22(5), pages 1313-1337, September.
    8. Jessica Coria & Xiao-Bing Zhang, 2015. "State-Dependent Enforcement to Foster the Adoption of New Technologies," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 62(2), pages 359-381, October.
    9. Pauli Lappi, 2017. "Emissions trading, non-compliance and bankable permits," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 24(6), pages 1081-1099, December.
    10. Clara Villegas-Palacio & Jessica Coria, 2010. "On the interaction between imperfect compliance and technology adoption: taxes versus tradable emissions permits," Journal of Regulatory Economics, Springer, vol. 38(3), pages 274-291, December.
    11. Florian Baumann & Tim Friehe, 2017. "Design standards and technology adoption: welfare effects of increasing environmental fines when the number of firms is endogenous," Environmental Economics and Policy Studies, Springer;Society for Environmental Economics and Policy Studies - SEEPS, vol. 19(2), pages 427-450, April.
    12. Haiyang Xia & Tijun Fan & Xiangyun Chang, 2019. "Emission Reduction Technology Licensing and Diffusion Under Command-and-Control Regulation," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 72(2), pages 477-500, February.

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    More about this item

    Keywords

    environmental policy; technology adoption; monitoring; non-compliance;
    All these keywords.

    JEL classification:

    • K42 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Illegal Behavior and the Enforcement of Law
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
    • Q28 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Government Policy

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