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Dynamic incentive regulation of diffuse pollution
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La Nauze, Andrea and Mezzetti, Claudio (2019) Dynamic incentive regulation of diffuse pollution. Journal of Environmental Economics and Management, 93 . pp. 101-124. doi:10.1016/j.jeem.2018.11.009
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Official URL: https://doi.org/10.1016/j.jeem.2018.11.009
Abstract
Diffuse pollution from agriculture and extractive industries reduces air and water quality and contributes to climate change. We consider a setting in which a regulator must incentivize unobserved abatement given that firms have limited liability, and when they can enter and exit. We demonstrate that a simple dynamic incentive scheme can solve this difficult regulatory problem: firms pay a constant tax and receive rebates following periods of low pollution. We apply the model to water pollution from a fracking operation and simulate the contract to explore the volatility of the firm's payments and the costs of limited liability.
| Item Type: | Journal Article | ||||||||
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| Subjects: | H Social Sciences > HF Commerce H Social Sciences > HG Finance T Technology > TD Environmental technology. Sanitary engineering |
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| Divisions: | Faculty of Social Sciences > Economics | ||||||||
| Library of Congress Subject Headings (LCSH): | Nonpoint source pollution, Best management practices (Pollution prevention), Rebates, Incentives in industry | ||||||||
| Journal or Publication Title: | Journal of Environmental Economics and Management | ||||||||
| Publisher: | Elsevier | ||||||||
| ISSN: | 0095-0696 | ||||||||
| Official Date: | January 2019 | ||||||||
| Dates: |
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| Volume: | 93 | ||||||||
| Page Range: | pp. 101-124 | ||||||||
| DOI: | 10.1016/j.jeem.2018.11.009 | ||||||||
| Status: | Peer Reviewed | ||||||||
| Publication Status: | Published | ||||||||
| Access rights to Published version: | Restricted or Subscription Access | ||||||||
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