Noncompliance and the economic theory of pollution control

Thesis/Dissertation · Sun Jan 01 04:00:00 EST 1984

OSTI ID:5117184

Malik, A S

This study examines the consequences of noncompliance for three of the most commonly discussed policy instruments for controlling pollution: effluent standards, transferable discharge permit (TDP) markets, and effluent taxes. In addition, it evaluates the effectiveness of alternative means of promoting compliance with each of these three policies in a comparative static framework. The study is based on an analysis of the behavior of a noncompliant firm that maximizes the expected utility of profits given uncertainty regarding the detection of violations. Penalties for noncompliance are a function of the firm's violation size and its outlays on penalty avoidance activities such as litigation. The model of the firm is structured as a simple two-stage stochastic dynamic programming problem, with the level of outlays on avoidance activities chosen after detection uncertainty is resolved. In the case of effluent standards set so as to minimize aggregate abatement costs given a total discharge goal, it is shown that under noncompliance the aggregate abatement that is undertaken is not achieved at minimum cost. In contrast, both a TDP market and an effluent tax retain the abatement cost-minimizing property in the presence of noncompliance if a firm's probability of detection is constant or a function of its violation size.

• Research Organization: Johns Hopkins Univ., Baltimore, MD (USA)
• OSTI ID: 5117184
• Country of Publication: United States
• Language: English

Related Subjects

29 ENERGY PLANNING, POLICY, AND ECONOMY
290200 -- Energy Planning & Policy-- Economics & Sociology
290300* -- Energy Planning & Policy-- Environment
Health
& Safety
ADMINISTRATIVE PROCEDURES
COMPLIANCE
CONTROL
ECONOMIC ANALYSIS
ECONOMICS
ENVIRONMENTAL POLICY
GOVERNMENT POLICIES
PERMITS
POLLUTION ABATEMENT
POLLUTION CONTROL
STANDARDS
TAXES