State-Dependent Enforcement to Foster the Adoption of New Technologies

Harrington (J Public Econ 37:29–53, 1988) shows that a suitable strategy for regulators to make enforcement more efficient is to target surveillance resources according to past compliance records. Such scheme generates enforcement leverage as non-compliance triggers greater future scrutiny increasing the expected costs of non-compliance beyond the avoidance of immediate fines. In this paper, we propose an improved transition structure for the audit framework, in which targeting is based not only on firms’ past compliance record but also on adoption of environmentally superior technologies. We show that this transition structure would not only foster the adoption of new technology but also increase deterrence by changing the composition of firms in the industry toward an increased fraction of cleaner firms that pollute and violate less.

[1]  A. Randall,et al.  An Integrated Strategy to Reduce Monitoring and Enforcement Costs , 2000 .

[2]  Abdoul G. Sam,et al.  1 Voluntary Pollution Reductions and the Enforcement of Environmental Law : An Empirical Study of the 33 / 50 Program , 2004 .

[3]  Carmen Arguedas.  Pollution standards, technology investment and fines for non-compliance , 2013, Journal of Regulatory Economics.

[4]  S. Rousseau,et al.  Learning About Compliance Under Asymmetric Information , 2008 .

[5]  K. Telle,et al.  Firms’ Compliance to Environmental Regulation: Is There Really a Paradox? , 2006 .

[6]  J. Zofío,et al.  Environmental Policy Instruments: Technology Adoption Incentives with Imperfect Compliance , 2010 .

[7]  Sandra Rousseau,et al.  Timing of environmental inspections: survival of the compliant , 2007 .

[8]  D. Zilberman,et al.  Regulating pollution with endogenous monitoring , 2002 .

[9]  Jessica Coria,et al.  Environmental policy, fuel prices and the switching to natural gas in Santiago, Chile☆ , 2009 .

[10]  M. Raymond.  Enforcement leverage when penalties are restricted: a reconsideration under asymmetric information , 1999 .

[11]  Till Requate,et al.  On the Incentives Created by Policy Instruments to Adopt Advanced Abatement Technology if Firms are Asymmetric , 2001 .

[12]  L. Nadeau.  EPA Effectiveness at Reducing the Duration of Plant-Level Noncompliance , 1997 .

[13]  Paul Stoneman,et al.  The Role of Supply Factors in the Diffusion of New Process Technology , 1983 .

[14]  Enforcement Leverage with Fixed Inspection Capacity , 2013 .

[15]  The role of warnings in regulation: keeping control with less punishment , 2004 .

[16]  Christopher S. Decker,et al.  Voluntary Environmental Investment and Responsive Regulation , 2006 .

[17]  John Livernois,et al.  Truth or consequences: Enforcing pollution standards with self-reporting , 1999 .

[18]  J. Harford.  Measurement error and state-dependent pollution control enforcement , 1991 .

[19]  Thomas Sterner,et al.  Refunded emission payments and diffusion of NOx abatement technologies in Sweden , 2015 .

[20]  L. Friesen.  Targeting Enforcement to Improve Compliance with Environmental Regulations , 2003 .

[21]  Winston Harrington,et al.  Enforcement leverage when penalties are restricted , 1988 .

[22]  J. Coria,et al.  On the interaction between imperfect compliance and technology adoption: taxes versus tradable emissions permits , 2010 .

[23]  Wayne B. Gray,et al.  The Effectiveness of Environmental Monitoring and Enforcement: A Review of the Empirical Evidence , 2011, Review of Environmental Economics and Policy.

[24]  G. Brady,et al.  Capital Turnover and Marketable Pollution Rights , 1988, The Journal of Law and Economics.

[25]  John P. Weyant,et al.  The role of technology for achieving climate policy objectives: overview of the EMF 27 study on global technology and climate policy strategies , 2014, Climatic Change.

[26]  Robert N. Stavins,et al.  For workshop on Architectures for Agreement: Addressing Global Climate Change in the Post Kyoto World , 2006 .

[27]  David Pérez-Castrillo,et al.  Optimal Enforcement Policy and Firms' Emissions and Compliance with Environmental Taxes , 2004, SSRN Electronic Journal.

[28]  David Zilberman,et al.  Policy for the adoption of new environmental monitoring technologies to manage stock externalities , 2012 .

[29]  Grischa Perino,et al.  Does more stringent environmental regulation induce or reduce technology adoption? When the rate of technology adoption is inverted u-shaped , 2012 .

[30]  N. Rickman,et al.  Regulatory dealing - revisiting the Harrington paradox , 1999 .

[31]  J. Coria,et al.  Regulatory Dealing: Technology Adoption Versus Enforcement Stringency of Emission Taxes , 2014 .

[32]  W. Harrington,et al.  A reconsideration of enforcement leverage when penalties are restricted , 1991 .

[33]  A. Keeler,et al.  Incomplete enforcement with endogenous regulatory choice , 1994 .

[34]  Using competition to stimulate regulatory compliance: A tournament-based dynamic targeting mechanism , 2015 .