Optimal monitoring to implement clean technologies when pollution is random

Arbeitspapier

We analyze a model where firms chose a production technology which, together with some random event, determines the final emission level. We consider the coexistence of two alternative technologies: a “clean” technology, and a “dirty” technology. The environmental regulation is based on taxes over reported emissions, and on penalties over unreported emissions. We show that the optimal inspection policy is a cut-off strategy, for several scenarios concerning the observability of the adoption of the clean technology and the cost of adopting it. We also show that the optimal inspection policy induces the firm to adopt the clean technology if the adoption cost is not too high, but the cost levels for which the firm adopts it depend on the scenario.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: CESifo Working Paper ; No. 1966

Classification and Topics

• Classification: Wirtschaft ; Energy, Environmental, Health, and Safety Law ; Illegal Behavior and the Enforcement of Law ; Asymmetric and Private Information; Mechanism Design
• Subject: Umweltpolitik ; Kontrolle ; Umweltbelastung ; Fertigungstechnik ; Technologiewahl ; Umweltschutz ; Ökosteuer ; Theorie

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Macho-Stadler, Inés ; Pérez-Castrillo, David
• Event: Veröffentlichung
• (who): Center for Economic Studies and ifo Institute (CESifo)
• (where): Munich
• (when): 2007

Further information

• Handle: http://hdl.handle.net/10419/26011
• Last update: 10.03.2025, 11:45 AM CET