Ambient environmental monitoring, sequential firm inspections and time-decreasing benefits of inspection

We consider an environmental enforcement agency who uses the measurement of ambient pollution to guide its inspections of individual polluters. We compare two different uses of this information. In a first model, the agency uses a ``threshold strategy": if ambient pollution exceeds an endogenous threshold, the agency inspects all individual polluters simultaneously. In a second model, the agency inspects polluters sequentially, and s its beliefs with respect to the firms' behavior after each firm inspection. If the cost of delaying the inspection of noncompliant firms is low enough, this sequential inspection policy is superior to a simultaneous inspection policy. However, if the cost of delay is high, the agency is better off if it commits itself to ignoring some information embedded in ambient pollution.environmental enforcement ambient monitoring sequential inspection policy

Environmental policy as a multi-task principal-agent problem

We use a multi-task principal-agent model with moral hazard to study environmental regulation of a private agent by an EPA that can also allocate its budget to an alternative project with environmental benefits. In a first possible optimum, the EPA imposes a flat fine that exhausts the agent's participation constraint. In the second, the EPA provides the harshest possible punishment for a "poor" observed environmental performance and the highest possible reward for a "good" observed environmental performance. Increases in the available budget and in the maximally allowed penalty have then an ambiguous e_ect on total environmental quality.environmental regulation, multi-tasking

``The choice between emission taxes and output taxes under imperfect monitoring": a comment

We consider a special case of Schmutzler's and Goulder''s (1997) analysis of output taxes vs emission taxes as environmental policy instruments. We identify new necessary conditions for the existence of an optimum. We also show that, in this case, it is always optimal to have a mixed tax with positive enforcement effort.

A theoretical framework for incentives in the public sector

This note considers the provision of incentives in public organizations that face the following three constraints. First, no lateral entry is possible. Second, the outside opportunities of bureaucrats are independent of their performance. Third, the organization cannot design incentive schemes with stochastic wage bills. In our incentive scheme., the organization contains three jobs. Every period, the organization recruits two agents for the ``field" jobs. At the end of the period, one agent is put in retirement and the other is promoted to the ``executive" job. An agent will be promoted if he has obtained the highest performance on the managerial aspects of the ``field" job, and has passed an endogenous standard of performance on the technical aspects of this ``field" job. This system (1) provides incentives for optimal efforts in the ``field" job AND (2) improves on a purely random allocation system of the “executiveâ€. There are problems of time consistency, though.

ambient environmental inspections in repeated enforcement games

We consider an environmental inspection agency who credibly commits to a permanent observation of ambient pollution at the property line of individual firms. In this setting, standard results in the theory of repeated games generalize to enforcement games. The inspection agency obtains partial compliance without ever penalizing the polluter, even in settings where it would never obtain any compliance in the stage game. We identify under which conditions this is an improvement compared to a game where the agency does not collect prior information. Both equilibrium and out-of-equilibrium behavior can be given a nice intuitive interpretation.environmental enforcement; repeated games

Environmental Liability and Organizational Structure

This paper presents a multitask principal-agent model to examine how environmental liability rules for individual managers within a corporate hierarchy affect, on the one hand, the incentive schemes the organization provides and, on the other hand, the choice between a functional or a product-based organizational structure. If managers are risk neutral, a product-based organization dominates a functional organization and allows to obtain first-best effort level. If, moreover, there are no diseconomies of span, both organizational forms are equivalent. It is also shown that for the dominant function, effort levels are higher in a product-based organization than in a functional one. With risk averse managers, no organizational structure dominates the other in general, but we are able to identify under which conditions it does not matter who is held liable for environmental damages.contracts, liability, firm structure, principal-agent

Multi Pollutant Yardstick Schemes as Environmental Policy Tools

We consider environmental regulation of n risk-averse, multiple pollutant firms. We develop a “yardstick competition” scheme where the regulatory scheme depends on the dierence between a firm’s “aggregate” performance and the average “aggregate” performance of the industry. Whether this instruments dominates Pigovian taxation depends on the complete structure of the covariance matrix of the “common” random terms in measured pollution. Moreover, if the number of firms is large enough, the “yardstick scheme” is always superior to Pigovian taxation. This analysis also provides new arguments in favor of strict liability rather than negligence liability as regulatory tool.yardstick competition, multitasking, environmental regulation, asymmetric information

A Note on Organizational Design and the Optimal Allocation of Environmental Liability

A multi task principal-agent model is employed to derive optimal environmental liability rules for risk neutral managers under two alternative organizational structures - a functional organization and a product-based organization. For a product-based organization it is shown that efficiency is independent of whether the firm or managers are liable for environmental damages. In a functional organization it is optimal either to hold the firm liable for environmental damages or, equivalently, not to hold the production managers liable for environmental damages. We derive conditions to obtain the first-best solution for a given organizational structure. Finally, the organizational form that induces the highest environmental effort induces the lowest production effort and vice versa. This suggests that production and environmental protection are substitutes rather than complements

The impact of self-driving cars on the national transport system: an assessment for Belgium

We study how full automation of the car fleet affects traffic volumes, congestion, and fuel consumption at the country level in Belgium. The central scenario in this paper looks at the combined effect of a lower opportunity cost of travel time, an increase in the acquisition price of cars by 20%, a decrease in insurance costs by 50% and a decrease in fuel consumption per km by 10%. The improvement in fuel efficiency always dominates the increase in acquisition costs, and average monetary costs decrease. Overall car travel increases by 21 up to 26%. Despite the improvement in fuel efficiency, total fuel consumption for diesel and gasoline increases by 5 up to 10%. The impact on the speed of road modes is highly location specific. A sensitivity analysis revealed that there is a threshold improvement in fuel efficiency where the “rebound effect” is nullified. To counteract the effects of full automation on total demand for car travel, a road charge close to 20 EUR cent per km would be needed