{"title":"Entry, location, and optimal environmental policies","authors":"Manuel Estay , John K. Stranlund","doi":"10.1016/j.reseneeco.2022.101326","DOIUrl":null,"url":null,"abstract":"<div><p>We investigate the problem of choosing environmental regulations to control a multilateral, spatially heterogeneous pollution externality. There are three sources of inefficiency in this problem; the number of firms, their locations and their production/emissions levels. A first-best policy requires three instruments to address each of the sources of inefficiency, but such policies are not practical in most settings. Therefore, we examine the relative performance of second-best policies that optimally control one or two of the sources of inefficiency while leaving the other one or two sources uncontrolled. Because of the complexity of our theoretical model, we conduct numerical simulations to compare the alternative policies. We find that a policy of optimally-chosen individual quotas by themselves perform very poorly, because they encourage excessive entry. Combining individual quotas with an optimal entry restriction performs significantly better. Spatially differentiated taxes alone perform very well, because they partially address both the entry and location sources of inefficiency in addition to limiting pollution. We also argue that the welfare losses associated with even simpler policies like zoning restrictions or homogeneous taxes may not be high enough to justify the additional implementation difficulties associated with theoretically more efficient policies.</p></div>","PeriodicalId":47952,"journal":{"name":"Resource and Energy Economics","volume":"70 ","pages":"Article 101326"},"PeriodicalIF":2.6000,"publicationDate":"2022-11-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":"2","resultStr":null,"platform":"Semanticscholar","paperid":null,"PeriodicalName":"Resource and Energy Economics","FirstCategoryId":"96","ListUrlMain":"https://www.sciencedirect.com/science/article/pii/S0928765522000434","RegionNum":3,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":null,"EPubDate":"","PubModel":"","JCR":"Q1","JCRName":"ECONOMICS","Score":null,"Total":0}
引用次数: 2
Abstract
We investigate the problem of choosing environmental regulations to control a multilateral, spatially heterogeneous pollution externality. There are three sources of inefficiency in this problem; the number of firms, their locations and their production/emissions levels. A first-best policy requires three instruments to address each of the sources of inefficiency, but such policies are not practical in most settings. Therefore, we examine the relative performance of second-best policies that optimally control one or two of the sources of inefficiency while leaving the other one or two sources uncontrolled. Because of the complexity of our theoretical model, we conduct numerical simulations to compare the alternative policies. We find that a policy of optimally-chosen individual quotas by themselves perform very poorly, because they encourage excessive entry. Combining individual quotas with an optimal entry restriction performs significantly better. Spatially differentiated taxes alone perform very well, because they partially address both the entry and location sources of inefficiency in addition to limiting pollution. We also argue that the welfare losses associated with even simpler policies like zoning restrictions or homogeneous taxes may not be high enough to justify the additional implementation difficulties associated with theoretically more efficient policies.
期刊介绍:
Resource and Energy Economics provides a forum for high level economic analysis of utilization and development of the earth natural resources. The subject matter encompasses questions of optimal production and consumption affecting energy, minerals, land, air and water, and includes analysis of firm and industry behavior, environmental issues and public policies. Implications for both developed and developing countries are of concern. The journal publishes high quality papers for an international audience. Innovative energy, resource and environmental analyses, including theoretical models and empirical studies are appropriate for publication in Resource and Energy Economics.