RT info:eu-repo/semantics/article
T1 Optimal Pollution Standards and Non-Compliance in a Dynamic Framework
A1 Arguedas, Carmen
A1 Cabo García, Francisco José
A1 Martín Herrán, Guiomar
AB In this paper we present a Stackelberg differential game to study the dynamicinteraction between a polluting firm and a regulator who sets pollution limits overtime. Ateach time, the firm settles emissions taking into account the fine for non-compliance withthe pollution limit, and balances current costs of investments in a capital stock which allowsfor future emission reductions. We derive two main results. First, we show that the optimalpollution limit decreases as the capital stock increases, while both emissions and the levelof non-compliance decrease. Second, we find that offering fine discounts in exchange forfirm’s capital investment is socially desirable. We numerically obtain the optimal value ofsuch discount, which crucially depends on the severity of the fine. In the limiting scenariowith a very large severity of the fine, the optimal discount implies that no penalties are levied,since the firm shows adequate adaptation progress through capital investment.
YR 2017
FD 2017
LK http://uvadoc.uva.es/handle/10324/27726
UL http://uvadoc.uva.es/handle/10324/27726
LA eng
NO Enviromental and Resource Economics 68, 537-567, 2017.
NO Producción Científica
DS UVaDOC
RD 27-dic-2024