Effective Enforcement of a Transferable Emissions Permit System with a Self-Reporting Requirement |
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Authors: | Stranlund John K Chavez Carlos A |
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Institution: | (1) Department of Resource Economics, University of Massachusetts, University of Massachusetts-Amherst, Amherst, MA, 01003;(2) Universidad de Concepcion, Chile;(3) Departamento de Economia, Universidad de Concepcion, Casilla 1987, Concepcion, Chile |
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Abstract: | We propose an enforcement strategy to achieve complete compliance in a transferable emissions permit system when firms are required to provide reports of their own emissions. Like the literature on self-reporting in the enforcement of standards, we find that self-reporting can conserve monitoring costs, but for a different reason. In addition, we show that targeted monitoring—the practice of monitoring some firms more closely than others—is not necessary in a competitive permit system. Furthermore, tying penalties to the equilibrium permit price can stabilize the monitoring effort necessary to maintain full compliance in the face of permit price fluctuations. |
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