Performance versus design standards in the regulation of pollution

David Besanko*

*Corresponding author for this work

Research output: Chapter in Book/Report/Conference proceedingChapter

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 emissions 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)
Title of host publicationThe Theory and Practice of Command and Control in Environmental Policy
PublisherTaylor and Francis
Pages17-42
Number of pages26
ISBN (Electronic)9781315197296
ISBN (Print)9781138715905
StatePublished - Jan 12 2018

ASJC Scopus subject areas

  • Social Sciences(all)

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