Non-point source pollution control policy for stochastic but constant environmental damage

Eiji Sawada, Takayoshi Shinkuma and Akira Hibiki

No 17, TUPD Discussion Papers from Graduate School of Economics and Management, Tohoku University

Abstract: The interest of this paper is in the area of non-point source pollution, especially that produces a certain large environmental damage in a stochastic manner. Most previous studies on non-point source pollution control policies have implicitly assumed that the abatement efforts of economic agents as a whole can be estimated by assuming environmental damages whose magnitude depends on the abatement efforts of economic agents. When assuming environmental damage that occurs at a certain magnitude in a stochastic manner, the policies proposed by previous studies may achieve efficiency but do not prevent collusion. Therefore, this paper designs new efficiency and collusion-proof policies that work even when not only individual abatement efforts cannot be observed, but furthermore, when the total abatement effort cannot be estimated. Our policy only requires an honest reportig as a whole. By remaining room for adjustment in the reported amount of individual economic agents, our policy is also shown to achieve an equal burden among eocnomic agents.

Pages: 20 pages
Date: 2022-03
New Economics Papers: this item is included in nep-ene and nep-env
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Persistent link: https://EconPapers.repec.org/RePEc:toh:tupdaa:17

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