Ambec, Stefan and Coria, Jessica (2021) The informational value of environmental taxes. Journal of Public Economics, vol. 199 (n° 104439).

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Identification Number : 10.1016/j.jpubeco.2021.104439

Abstract

We propose informational spillovers as a new rationale for the use of multiple policy instruments to mitigate a single externality. We investigate the design of a pollution standard when the firms’ abatement costs are unknown and emissions are taxed. A firm might abate pollution beyond what is required by the standard by equalizing its marginal abatement costs to the tax rate, thereby revealing
information about its abatement cost. We analyze how a regulator can take advantage of this information to design the standard. In a dynamic setting,the regulator relaxes the initial standard in order to induce more information
revelation, which would allow her to set a standard closer to the first best in the future. Updating standards, though, generates a ratchet effect since a lowcost firm might strategically hide its cost by abating no more than required by the standard. We characterize the optimal standard and its update across time depending on the firm’s abatement strategy. We illustrate our theoretical results with the case of NOx regulation in Sweden. We find evidence that the firms that pay the NOx tax experience more frequent standard updates and more stringent revisions than those who are exempted.

Item Type: Article
Language: English
Date: July 2021
Refereed: Yes
Place of Publication: Amsterdam
Uncontrolled Keywords: Pollution, environmental policy, tax, asymmetric information, ratchet effect, multi-governance, policy overlap
JEL Classification: D21 - Firm Behavior
H23 - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
L51 - Economics of Regulation
Q48 - Government Policy
Q58 - Government Policy
Subjects: B- ECONOMIE ET FINANCE
Divisions: TSE-R (Toulouse)
Site: UT1
Date Deposited: 23 Sep 2021 13:15
Last Modified: 23 Nov 2021 14:47
OAI Identifier: oai:tse-fr.eu:125539
URI: https://publications.ut-capitole.fr/id/eprint/43401
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