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http://hdl.handle.net/10419/53177
  
Title:Enforcement and environmental quality in a decentralized emission trading system PDF Logo
Authors:D'Amato, Alessio
Valentini, Edilio
Issue Date:2008
Series/Report no.:Nota di lavoro // Fondazione Eni Enrico Mattei: Sustainable development 97.2008
Abstract:This paper addresses the issue of whether the powers of monitoring compliance and allocating tradeable emissions allowances within a federation of countries should be appointed to a unique federal regulator or decentralized to several local regulators. To this end, we develop a two stage game played by environmental regulator(s) and the polluting industries of two countries. Regulator(s) choose the amount of emission allowances to be issued and set the level of monitoring effort to achieve full compliance, while regulated firms choose actual emissions and the number of permits to be held. We identify various, possibly conflicting, spillovers among states in a decentralized setting. We show that cost advantage in favor of local regulators is not sufficient to justify decentralization. Nevertheless, cost differential in monitoring violations can imply lower emissions and greater welfare under a decentralized institutional setting than under a centralized one. However, while a better environmental quality under decentralization is a sufficient condition for higher welfare under the same regime, it is not also a necessary condition.
Subjects:Emissions Trading
Environmental Federalism
Enforcement
Monitoring Cost
JEL:F18
K42
Q53
Document Type:Working Paper
Appears in Collections:FEEM Working Papers, Fondazione Eni Enrico Mattei

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