Environmental federalism and environmental liability

Environmental federalism considers what level of government should optimally regulate pollution. This paper addresses this question for accidental pollution, which government regulates through the ex post liability regimes of either negligence or strict liability. We find that decentralizing the choice between these regimes does not, in general, induce the socially optimal outcome. When firms can pay all damages, all regions may choose negligence and impose an overly strict standard of due care. When firms may be bankrupted by damages, all regions may choose strict liability, which induces too little care. In addition, asymmetric equilibria are possible in which some regions choose negligence, others strict liability. Combining negligence with a Pigovian tax, or strict liability with a bonding requirement can align regional authorities' incentives with those of a central government.     

Incentives to diffuse advanced abatement technology under environmental liability law

Polluting firms with advanced abatement technology at their disposal have incentives or disincentives to share this technology with other polluting firms. The ‘direction’ and extent of those incentives depends on the liability rule applicable and the way technical change impacts marginal abatement costs. We establish that incentives for diffusion are socially optimal under strict liability and socially suboptimal under negligence if technical change lowers marginal abatement costs for all levels of abatement. Negligence may, however, induce better diffusion incentives than strict liability if technical change decreases (increases) marginal abatement costs for low (high) levels of abatement.     

Competitive investment in clean technology and uninformed green consumers

In a market where consumers and the regulatory authorities are not fully informed about the actual production technology or environmental performance of firms that engage in strategic competition, I study the effect of environmental consciousness of consumers on firms׳ incentive to invest in cleaner technology. Firms compete in prices and may signal their environmental performance to uninformed consumers through prices. I also analyze the effect of an expected liability on firms in this setting. Compared to full information, incomplete information generates higher strategic incentive to invest in cleaner technology particularly when consciousness and/or expected liability are not too high. Requiring mandatory disclosure of technology or environmental performance may discourage such investment. Even though consumers and the regulator are uninformed, competition has a positive effect (relative to monopoly) on the incentive to invest.     

Improving the prevention of environmental risks with convertible bonds

This paper considers a limited liability firm that needs external funds in order to invest in an activity that presents an environmental risk for the Society. When the firm's risk-reducing activities cannot be observed by the lenders, we show that the issue of convertible bonds can create incentives to improve prevention. Convertible bonds allow the holder to exchange his bonds for a fixed number of the firm's shares. The use of such hybrid securities could either complement or be an alternative to the American CERCLA legislation about lender extended liability. We define an optimal convertible bond contract that induces unchanged economic profits for the bank, more prevention and higher expected net revenues for the firm and a higher expected social welfare than with standard debt. Our results hold true both with and without extended liability.     

Multiple receptor ambient monitoring and firm compliance with environmental taxes under budget and target driven regulatory missions

We analyze the potential for an environmental monitoring agency under different regulatory missions to use multiple measures of ambient pollution levels to induce firm compliance via endogenously determined probabilistic firm-level inspections of polluting activities. Departing from previous analyses, we consider a framework where the regulator has multiple, rather than a single, measures of ambient pollution in a setting where many firms are subject to a self-reported emissions tax that is not perfectly enforceable. Under a budget-driven mission, we show that a regulator can fruitfully utilize the added information from multiple ambient monitoring receptors to induce improved environmental compliance through the creation of strategic interactions among firms. Additionally, our results provide new evidence on the relative efficiency of budget- vs. target-driven environmental enforcement missions.     

The strategic use of innovation to influence regulatory standards

This paper investigates the welfare consequences of strategic behavior by firms to affect the amount of environmental regulation they face. Environmental regulation often attempts to force an industry to develop cleaner technology, but the regulator may have no means to commit to a specific standard. This lack of regulatory commitment induces firms to choose innovation strategically. It is well-known that firms have incentives to suppress innovation to induce the regulator to ratchet down the standard, and this strategic behavior lowers welfare. This paper explores a countervailing incentive. In oligopoly settings, firms have heightened incentives to innovate so as to increase regulation and raise rivals costs. In equilibrium, the incentive to raise rivals cost can mitigate the welfare loss arising from no regulatory commitment. Also, a regulator who is unable to commit ex ante to the stringency of a regulatory standard can induce more clean technology than a regulator with a commitment mechanism.     

污染土地价值评估问题探讨

工业化和城市化为人类福利的改善作出极大的贡献,也带来了大量的污染土地。污染土地是指含有能对人身健康、环境或其它目标产生直接或间接危害的污染物的土地。污染会影响土地的价值,因此,污染土地价值评估问题近年来受到关注。文章总结了污染土地价值评估的研究进展,对关键概念进行探讨和界定,依据我国常用的几种传统土地价值评估方法,探讨如何进行修正以适应污染土地的价值评估,并对污染清理费用、环境责任费用、污名等一些关键问题进行讨论,提出污染土地的价值损失中必须考虑几个方面的不确定性：（1）与工程措施有关的清理费用的不确定性;（2）当前和未来管制要求的不确定性;（3）市场对污染损害反应的不确定性;（4）随着时间变化,市场对污染损害反应的变化。最后结合实际,说明污染土地价值评估不仅要探索新方法,也要在增加和完善环境方面的立法、进一步完善技术标准、促进学科的相互交流和发挥行业组织的主导作用等方面加强。     

Firms' and states’ responses to laxer environmental standards

On June 1, 2017, President Trump announced the United States' withdrawal from the Paris agreement on climate change. Despite this decision, American firms continued investing in low-carbon technologies and some states committed to tougher environmental standards. To understand this apparent paradox, this paper studies how a weakening of environmental standards affects the behavior of profit-maximizing firms. It finds that a relaxation of emission standards (i) may increase firms’ incentives to adopt clean technologies, but not to pollute less; (ii) may negatively affect industry profitability if it is perceived as temporary; and, when this is the case, (iii) the unilateral adoption of stricter standards by large states may increase the expected profitability of every firm.     

Why does environmental compliance cost more than penalty?

In the environmental protection field of China, due to “lower law-breaking cost but higher law-abiding cost”, it is a common case that the enterprise chooses to break through the law on purpose. The punishment to the unlawful practices by the law directly decides the law-breaking cost of the enterprise, furthermore, influences the willingness to abide by the law and the trend to break through the law. The law-breaking cost of enterprises is jointly decided by the administrative liability, civil liability and criminal liability. However, in China, the enterprises breaking through the law are mainly penalized for the administrative liabilities, focusing less on the civil compensation liability on the environmental damage and criminal liabilities on the environmental crimes. Nevertheless, a complete environmental liability system is composed by administrative punishment, civil compensation and criminal sanction, none of which is dispensable. Therefore, the three layers defense could be established on punishing and deterring the environmental law-breakers. Considering all three aspects, administrative liability, civil liability and criminal liability, this paper analyzes the systemic disadvantages of the current environmental administrative punishment, civil compensation and criminal sanction in China, and investigates the legitimate reasons for the higher law-abiding cost compared with the law-breaking cost, and it is finalized with the measures and suggestions to solve this problem.     

Regulation with direct benefits of information disclosure and imperfect monitoring

We model the optimal design of programs requiring heterogeneous firms to disclose harmful emissions when disclosure yields both direct and indirect benefits. The indirect benefit arises from the internalization of social costs and resulting reduction in emissions. The direct benefit results from the disclosure of previously private information which is valuable to potentially harmed parties. Previous theoretical and empirical analyses of such programs restrict attention to the former benefit while the stated motivation for such programs highlights the latter benefit. When disclosure yields both direct and indirect benefits, policymakers face a tradeoff between inducing truthful self-reporting and deterring emissions. Internalizing the social costs of emissions, such as through an emissions tax, will deter emissions, but may also reduce incentives for firms to truthfully report their emissions.     

Stochastic pollution, costly sanctions, and optimality of emission permit banking

This paper identifies a new economic motive for pollution regulations that allow polluting firms to bank and borrow emission permits over time. When aggregate pollution is stochastic, an intertemporal permit trading regime can provide firms with efficient incentives for pollution abatement without the need for costly government enforcement actions that would otherwise be required.     

Environmental Auditing in Management Systems and Public Policy

New international standards for environmental auditing are now being actively promoted by public authorities and adopted by private firms. One important feature of these standards is their emphasis on managerial systems and incentives that support a wiser use of environmental resources. This paper studies such a system, in which incentive compensation may be based in part on the results of an environmental audit. It is found that optimal wages after an environmental audit is performed should have a greater range than wages paid when no audit has occurred. It is also shown that the decision to conduct an environmental audit and the size of the expected wage in this case depend crucially on whether the agent's prudence (or precautionary motives) dominates his aversion to risk. It is finally found that the insertion of environmental audits within current management systems would certainly induce a manager to care more about the environment; although this may come at the expense of less concern for other activities, we find plausible circumstances in which properly designed environmental audits overcome such a tradeoff and increase the manager's attention tobothenvironmental and traditional tasks. Some implications of the analysis for environmental public policy are also discussed briefly.     

Environmental policies and productivity growth: Evidence across industries and firms

This paper investigates the impact of changes in environmental policy stringency on industry- and firm-level productivity growth in a panel of OECD countries. To test the strong version of the Porter Hypothesis (PH), we extend a neo-Schumpeterian productivity model to allow for effects of environmental policies. We use a new environmental policy stringency (EPS) index and let the effect of countries׳ environmental policies vary with the pollution intensity of the industry and with the countries’ and firms’ technological advancement. A tightening of environmental policy is associated with a short-term increase in industry-level productivity growth in the most technologically-advanced countries. This effect diminishes with the distance to the global productivity frontier, eventually becoming insignificant. For the average firm, no evidence of PH is found. However, the most productive firms see a temporary boost in productivity growth, while the less productive ones experience a productivity slowdown.     

On the search for mimetic patterns in environmental disclosure: an international perspective

In this paper, we assert and test the proposition that environmental disclosure (ED) is structured by institutionalised myths and that is why ED is decoupled from environmental performance and media pressures. Focusing on firms from Canada, France and Germany, findings show that ED mimetic isomorphism for different topics varies among countries and by industry sensitiveness to the environment. The results corroborate the institutional presumption that institutionalised myths vary among different contexts. Our findings also suggest that institutionalised ED structures may not reflect environmental performance, mimetic patterns being affected by environmental performance. However, the decoupling between ED mimetic isomorphism and environmental performance decrease when firms’ ED credibility is questioned by the media.     

The strategic use of innovation to influence regulatory standards

This paper investigates the welfare consequences of strategic behavior by firms to affect the amount of environmental regulation they face. Environmental regulation often attempts to force an industry to develop cleaner technology, but the regulator may have no means to commit to a specific standard. This lack of regulatory commitment induces firms to choose innovation strategically. It is well-known that firms have incentives to suppress innovation to induce the regulator to ratchet down the standard, and this strategic behavior lowers welfare. This paper explores a countervailing incentive. In oligopoly settings, firms have heightened incentives to innovate so as to increase regulation and raise rivals costs. In equilibrium, the incentive to raise rivals cost can mitigate the welfare loss arising from no regulatory commitment. Also, a regulator who is unable to commit ex ante to the stringency of a regulatory standard can induce more clean technology than a regulator with a commitment mechanism.     

Pollution and Capital Markets in Developing Countries

It is said that firms in developing countries do not have incentives to invest in pollution control because of weak implementation of environmental regulations. This argument assumes that the regulator is the only agent that can create incentives for pollution control, and ignores that capital markets, if properly informed, may provide the appropriate financial and reputational incentives. We show that capital markets in Argentina, Chile, Mexico, and the Philippines do react to announcements of environmental events, such as those of superior environmental performance or citizens' complaints. A policy implication is that environmental regulators in developing countries may explicitly harness those market forces by introducing structured programs of information release pertaining to firms' environmental performance: public disclosure mechanisms in developing countries may be a useful model to consider given limited government enforcement resources.     

On optimal audit mechanisms for environmental taxes

We consider the auditing problem of an environmental enforcement agency with fixed audit resources: How to decide which firms to audit after having observed the firms' taxable emissions reports. The goal of the agency is to implement the socially efficient emissions level. The audit mechanism is the agency's sole choice variable, while other variables such as the tax rate on emissions and the fine for non-compliance are determined by other governmental actors. The fines and budget of the agency are constrained in such a way that the common random audit mechanism fails to implement socially efficient emissions. Assuming perfect information among the firms, we derive an optimal audit mechanism capable of implementing the socially efficient emissions level. The optimal audit mechanism creates a contest exploiting the strategic interdependencies between the firms, where the probability of winning (not being audited) for each firm depends on costly efforts (their taxable emissions reports).     

Reverse logistics in the Chinese auto-parts firms: implementation framework development through multiple case studies

In recent years, the implementation of reverse logistics (RL) in automobile manufacturing has drawn extensive interest from the Chinese government that has launched relevant take-back and environmental regulations and pilot projects. This study focuses on RL implementation issues in Chinese auto-parts manufacturing sector. Based on comprehensive literature review and multiple case studies in the Chinese auto-parts firms, this paper proposes a conceptual RL framework and highlights the major implementation issues. The purpose of this paper is to draw an overall picture of RL in the Chinese context, highlighting implementation issues in the auto-parts sector. Our study suggests that Chinese RL implementation requires close government monitoring mechanism and incentives, top management commitment within firms, technology and human capabilities support.     

Markets and environmental management with a storable pollutant

Lee [J. Environ. Econ. Manag., in press] investigates possibilities where pollutants may be stored for a period of time and later released into the environment when adverse effects are minimal. The treatment and storage of pollutants before their release into the environment is a crucial part of many abatement programs. Surprisingly, emission charges will not induce optimal abatement when storage is possible. This occurs because the firms' response to the dynamic tax is indeterminant. We suggest alternative controls, whereby rights to emit pollutants are sold competitively and demonstrate that markets provide incentives for the optimal generation-storage-emission of pollution by firms. In deriving this result an important difference between markets and taxes is revealed. With markets there is still indeterminacy at the firm level, but the aggregate response of all firms is dictated by market forces that insure pollution is reduced by some desired amount.     

Barriers to worldwide institutionalization of social and environmental disclosure

This study analyzes how groups of organizations that share their social and environmental information are formed in a similar way to identify barriers to the homogenization of social and environmental disclosure (SED) at the international level. Based on a sample of observations of listed firms from six different countries, results suggest that SED does not homogenize globally, spontaneously, because of cultural and geographical barriers. The institutions of environmental disclosure (ED) and social disclosure (SD) are different, thus forming different organizational fields at the international level. The spoken language is a barrier to the international isomorphism of ED and therefore to its comparability. However, language is a less important barrier to SD. When cultural institutions are weaker or have the same roots as North American institutions, cultural diversity does not stop the homogenization of the SD. Moreover, the ED is more isomorphic/comparable at the global level than SD, while the SD is more isomorphic/comparable at the level of culturally distinguishable subsets than ED.