Performance versus design standards in the regulation of pollution

David Besanko*

*Corresponding author for this work

Research output: Contribution to journalArticle

44 Scopus citations

Abstract

This paper presents a model of pollution regulation in an oligopolistic market. Two forms of regulation are considered: performance standards which regulate pollution directly by an upper limit on emissions, and design standards which regulate pollution indirectly by a minimum usage requirement of an enissions control input. Equilibria under each regulatory regime are characterized. A welfare analysis reveals that performance standards are preferred to design standards if the objective is minimization of emissions plus pollution damage costs. However, the comparison is indeterminate if the regulator's objective is total surplus less pollution damage. An equivalence between emissions taxes and performance standards is established, so the above welfare comparisons also apply to emissions taxes versus design standards.

Original languageEnglish (US)
Pages (from-to)19-44
Number of pages26
JournalJournal of Public Economics
Volume34
Issue number1
DOIs
StatePublished - Jan 1 1987

ASJC Scopus subject areas

  • Finance
  • Economics and Econometrics

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