Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/26011
Authors: 
Macho-Stadler, Inés
Pérez-Castrillo, David
Year of Publication: 
2007
Series/Report no.: 
CESifo working paper 1966
Abstract: 
We analyze a model where firms chose a production technology which, together with some random event, determines the final emission level. We consider the coexistence of two alternative technologies: a “clean” technology, and a “dirty” technology. The environmental regulation is based on taxes over reported emissions, and on penalties over unreported emissions. We show that the optimal inspection policy is a cut-off strategy, for several scenarios concerning the observability of the adoption of the clean technology and the cost of adopting it. We also show that the optimal inspection policy induces the firm to adopt the clean technology if the adoption cost is not too high, but the cost levels for which the firm adopts it depend on the scenario.
JEL: 
K32
K42
D82
Document Type: 
Working Paper

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