Firm behaviour under pollution ratio standards with non-compliance

Aaron Hatcher

Research output: Contribution to journalArticlepeer-review

Abstract

This paper compares a firm’s short run optimal production and abatement rules under emission level standards and standards expressed in terms of emissions per unit of output (ratio standards). The models allow for non-compliance with standards, with expected penalties dependant on either level or relative violations of the standard in question. It is shown that ratio arguments make a difference to the optimal decision rules derived for a profit-maximising firm. For example, for a given level of emissions the firm both produces more, and abates more, under a ratio standard, so that ratio and level standards cannot be used interchangeably to achieve the same combination of emissions and output. The implications for the efficiency of pollution control are briefly discussed.
Original languageEnglish
Pages (from-to)89-98
Number of pages10
JournalEnvironmental and Resource Economics
Volume38
Issue number1
DOIs
Publication statusPublished - Sep 2007

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