Markets for environmental protection: design and performance

  • Juan Pablo Montero

Abstract

Policy makers in different parts of the world are paying more attention to environmental markets (i.e., tradeable permits markets) as an alternative to the traditional command-and-command control approach of setting uniform emission and technology standards. I extend the basic (perfect information) model of a permits market to accommodate for practical considerations including regulator’s asymmetric information on firms’ costs, uncertainty on benefits from pollution control, incomplete enforcement, incomplete monitoring of emissions and the possibility of voluntary participation of non-affected sources. Implications for instrument design and implementation are provided.
Keywords Environmental regulation, permits markets, asymmetric information, incomplete enforcement
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How to Cite
Montero, J. (2016). Markets for environmental protection: design and performance. Estudios de Economía, 31(1), pp. 79-99. Retrieved from https://estudiosdeeconomia.uchile.cl/index.php/EDE/article/view/40856/43510
Section
Articles
Published
2016-05-06