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Bankruptcy Risk and Imperfectly Enforced Emissions Taxes

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  • Stranlund, John K.
  • Zhang, Wei

Abstract

Under favorable but reasonable conditions, an imperfectly enforced emissions tax produces the efficient allocation of individual emissions control; aggregate emissions are independent of whether enforcement of the tax is sufficient to induce the full compliance of firms, and differences in individual violations are independent of firm-level differences. All of these desirable characteristics disappear when some firms under an emissions tax risk bankruptcy—the allocation of emissions control is inefficient, imperfect enforcement causes higher aggregate emissions, and financially insecure firms choose higher violations.

Suggested Citation

  • Stranlund, John K. & Zhang, Wei, 2008. "Bankruptcy Risk and Imperfectly Enforced Emissions Taxes," Working Paper Series 42127, University of Massachusetts, Amherst, Department of Resource Economics.
    • Handle: RePEc:ags:umamwp:42127
    DOI: 10.22004/ag.econ.42127
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    References listed on IDEAS

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    1. repec:ebl:ecbull:v:17:y:2008:i:9:p:1-9 is not listed on IDEAS
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    More about this item

    Keywords

    Environmental Economics and Policy; Public Economics; Risk and Uncertainty;
    All these keywords.

    JEL classification:

    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
    • Q28 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Government Policy
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy

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