Environmental regulation and MNEs location: Does CSR matter?

We investigate whether firms with relatively low environmental standards are more often located in countries that are poor, corrupt or have weak environmental regulations. We find new empirical evidence in favor of the Pollution Haven Hypothesis, which states that MNEs are transferring their dirty operations to countries with weak environmental regulation. Our findings suggest that these are not necessarily the poorest or most corrupt countries. We establish that MNEs with strong social responsibility avoid locating their operations in countries with weak environmental regulation.     

The optimal initial allocation of pollution permits: a relative performance approach

The initial allocation of pollution permits is an important aspect of emissions trading schemes. We generalize the analysis of Böhringer and Lange (2005, Eur Econ Rev 49(8): 2041–2055) to initial allocation mechanisms that are based on inter-firm relative performance comparisons (including grandfathering and auctions, as well as novel mechanisms). We show that using firms’ historical output for allocating permits is never optimal in a dynamic permit market setting, while using firms’ historical emissions is optimal only in closed trading systems and only for a narrow class of allocation mechanisms. Instead, it is possible to achieve social optimality by allocating permits based only on an external factor, which is independent of output and emissions. We then outline sufficient conditions for a socially optimal relative performance mechanism.     

Valuation of Urban Air Pollution: A Case Study of Kanpur City in India

This study estimates the monetary benefits to individuals from health damages avoided if air pollution is reduced in the urban industrial city of Kanpur in India. A notable feature of this study is that it uses data from weekly health-diaries collected for three seasons. For measuring monetary benefits, the study considers two major components of health cost that is incurred due to adverse effects of air pollution on health i.e., the loss in wages due to workdays lost from work and the expenditure incurred on mitigating activities. The study estimates that a representative working individual from Kanpur would gain Rs. 165.47 per year if air pollution were reduced to a safe level. The extrapolated annual benefits for the entire population in the city are Rs. 224.55 million.     

Selective penalization of polluters: an inf-convolution approach

Summary. We consider an asymmetric polluting oligopoly. We demonstrate that optimal tax rates per unit of emission are not the same for all firms. We call this property selective penalization. Our Optimal Distortion Theorem states that the efficient tax structure requires that high cost firms pay a higher tax rate. Our Pro-concentration Motive Theorem states that optimal taxes increase the concentration of the industry, as measured by the Herfindahl index. Our Magnification Effect indicates that the variance of marginal costs is magnified by a factor which depends on the marginal cost of public funds.JEL Classification Numbers: Q20, D60, D63.We wish to thank Peter Neary, Kim Long, Raymond Riezman and a referee for very helpful comments. Financial support from SSHRC and FCAR are gratefully acknowledged. We would like to thank Hassan Benchekroun, Kim Long, and Koji Shimomura for discussions and comments.     

Determining damages from the operation of bidding rings: An analysis of the post-auction `knockout' sale

Summary. This paper studies ‘knockout’ auctions, typically organized by bidding rings, in which the winning bidder makes side-payments to all losing bidders. These side-payments provide an incentive for the ring members to bid higher than they would have in an identical public auction. As a consequence, neither the realized price nor the total payments of the winner are unbiased estimates of the item's price in the absence of collusion. This paper evaluates the extent of this overestimate in the independent private values case, for first and second price post-auction knockouts. Bids are not independent of the sharing rule but transfers from the winning bidder are. Further, bidder payoffs are independent of both the auction format and the sharing rule. The “overbidding” in the knockout is increasing with the dispersion of bidder valuations and of significant empirical relevance. This paper's results can be used to obtain an unbiased assessment of the damages inflicted on the seller. Received: May 1, 1996; revised version: September 7, 2000     

Endogenous Verifiability and Optimality in Agency

This paper investigates the optimal contract design in a principal-agent model where verification of an agent's action is endogenously determined through strategic interactions between contracting parties. We derive a necessary and sufficient condition for the first best outcome to be implemented as an equilibrium. The equilibrium has the following features: (i) The action level that the agent chooses is not verified even if it is possible. (ii) Nevertheless, the first best can be attained by making a contract contingent on the unverified action. Journal of Economic Literature Classification Numbers: D20, K40.     

Optimal taxation of flow pollutants when firms may also inflict catastrophic environmental damage

In many industries firms affect the environment in two distinct types of ways. Firstly they emit routine, anticipated volumes of “flow pollutants”, secondly they can potentially inflict catastrophic environmental damage, liability for which may be overhanging or limited by the law. Operaters of chemical plants, nuclear power stations and oil tankers are three examples. If an emissions tax or charge is to be levied on the flow pollutants in these cases how should it be set? We use simple dynamic-programming techniques to characterise second-best optimality. We identify contexts in which the tax should be raised above its Pigovian level to take account of the catastrophic potential, and others where it should be set below that level. The analysis has significant implications for how policymakers should go about calibrating “ecological taxes” in a number of high profile industries.     

Environmental innovation policy and international competition

We consider one polluting industry in an open economy. The national government implements a policy of industrial pollution control, by inducing appropriate technological innovation to reduce toxic emissions. The emission-reducing innovations are developed through firm-specific costly investments. Under different hypotheses on market structure (perfect competition, Bertrand and Cournot oligopoly), international competition forces the national government to subsidize innovation. The appropriate subsidy scheme varies according to the information available to the government and according to market structure. If information is asymmetric, the subsidy must include the information premium necessary to separate different types of firms.     

International aspects of pollution control

Pollution is a by-product of production, is only gradually dissolved by the environment, and crosses national borders. The market outcome ignores the adverse effects of pollution and thus yields higher levels of output and pollution than would prevail under a supranational social planner which does care about pollution. In practice, governments often do not cooperate and this leads to outcomes of pollution and production in between the market outcomes and the outcomes under supra-national social planning. Absence of precommitment leads to lower emission charges, less cleaning-up activities and more pollution. Appropriate levels of emission charges under the various outcomes are a result of this analysis. Attention is also paid to investment in clean technology. The debate between optimists, who believe that higher production is compatible with sound environmental policy, and pessimists can be analysed in this way.Earlier versions of this paper were presented at the EAERE conference Environmental Cooperation and Policy in the Single European Market, Venice, Italy, 17–20 April, 1990, and the CentER conference Economics of the Environment, Tilburg, The Netherlands, 17–19 September, 1990. The paper has benefitted from the comments of the participants of these conferences, and particularly of the detailed comments of Henk Folmer and Ignazio Musu.     

多管齐下治污染

排污权交易制度是目前国际上治理污染的新兴制度,与传统的政府管制手段相比,这一制度具有理论上的优越性,但其现实应用则受到诸多条件的制约。因此,对我国而言,需要综合运用政府管制手段、征收环境税(费)和排污权交易等手段来共同治理环境污染。