American Economic Review
ISSN 0002-8282 (Print) | ISSN 1944-7981 (Online)
The Effect of Allowing Pollution Offsets with Imperfect Enforcement
American Economic Review
vol. 101,
no. 3, May 2011
(pp. 268–72)
Abstract
Public policies for pollution control, including climate change policies, sometimes allow polluters in one sector subject to an emissions cap to offset excessive emissions with pollution abatement in another sector. The government may find it more costly to verify offset claims than to verify compliance with emissions caps. Concerns about such enforcement difficulties may lead regulators to restrict the use of offsets. We demonstrate that allowing offsets may increase pollution abatement and reduce illegal pollution, even if the government has a fixed enforcement budget. We explore circumstances that may make allowing pollution offsets an attractive option when enforcement is costly.Citation
Sigman, Hilary, and Howard F. Chang. 2011. "The Effect of Allowing Pollution Offsets with Imperfect Enforcement." American Economic Review 101 (3): 268–72. DOI: 10.1257/aer.101.3.268JEL Classification
- Q53 Air Pollution; Water Pollution; Noise; Hazardous Waste; Solid Waste; Recycling
- Q54 Climate; Natural Disasters; Global Warming
- Q58 Environmental Economics: Government Policy