اثرات مستقیم و بازار از اجرای برنامه های انتشار تجاری : تجزیه و تحلیل تجربی

Since firms in an emissions trading program are linked through the permit market, so too are their compliance choices. Thus, enforcement strategies for trading programs must account for the direct effects of enforcement on compliance and emissions decisions as well as the indirect effects that occur due to changes in permit prices. Our experimental results are consistent with theoretical predictions about both a negative direct effect of enforcement on individual violations and a countervailing market effect through the permit price. Furthermore, there is no direct effect of enforcement on the emissions choices of firms, only a negative price effect.

By exploiting the power of a market to allocate pollution control responsibilities, well-designed emissions trading programs promise to achieve environmental quality goals more cheaply than traditional command-and-control regulations. It is clear, however, that the potential of emissions trading is jeopardized if these programs are not enforced well. In recognition of this fact, there is now a significant literature on compliance and enforcement of emissions trading programs (e.g., Keeler, 1991, Malik, 1990, Malik, 1992, Malik, 2002, van Egteren and Weber, 1996, Stranlund and Dhanda, 1999 and Stranlund and Chavez, 2000). In general, this literature suggests that compliance behavior in emissions trading programs is likely to be very different from behavior under command-and-control standards or fixed emissions taxes. One of the more important differences is that firms in an emissions trading program are linked together through the permit market while they operate largely independently under both command-and-control policies and emissions taxes. Thus, compliance and enforcement of emissions trading programs are inextricably linked to permit markets. Indeed, any factor that affects compliance decisions will in turn impact the permit market, which has its own indirect effect on compliance via the permit price. For this study we have designed and conducted laboratory experiments to examine the direct and indirect market effects of enforcement on pollution and compliance decisions. Our hypotheses about these effects are derived from the simplest possible model of imperfect compliance in an emissions trading program. Our goal is to provide empirical tests of several fundamental results from the existing theory. A theoretically sound and empirically validated understanding of such fundamentals is critical for the appropriate design and implementation of enforcement strategies for market-based policies, and provides a baseline for theoretical and empirical extensions into more complicated environments. Most of our hypotheses are supported by the experimental data. One of the most important of these is that there is a direct effect of enforcement on individual violations as well as a countervailing market effect through the permit price. Increased enforcement through increased monitoring or higher penalties motivates firms to reduce their violations by purchasing more permits. This puts upward pressure on the equilibrium permit price, but higher permit prices motivate firms toward greater violations. Our experimental data are consistent with the theoretical prediction that the direct effect is always larger so that increased enforcement results in lower violations. However, the basic conclusion in this regard should be clear: the productivity of enforcement pressure in reducing noncompliance in emissions trading programs is partially offset by a countervailing price effect. Regulators who ignore this price effect would over-estimate the effectiveness of any attempt to reduce violations.1 The experimental results also provide strong support for a somewhat surprising result about enforcement and emissions choices: there is no direct effect of enforcement on the emissions choices of firms; there is only a negative price effect.2 That is, a firm's choice of emissions is independent of the enforcement strategy it faces, but this choice is not independent of the price of permits. An important implication of this conclusion is that the only way that increased enforcement can have an impact on environmental quality is if it is large enough and applied widely enough to lead to an increase in the equilibrium permit price. Increased enforcement pressure applied to a single firm or a small subset of firms will have no environmental impact. Matters are quite different for emissions standards and taxes. Under fixed emissions standards, adjusting emissions levels is the only way a firm can change its level of noncompliance. Thus, increased enforcement of emissions standards will reduce emissions and improve environmental quality. In the case of a fixed emissions tax, however, increased enforcement will have absolutely no effect on emissions. In this case, as in the case of competitive emissions trading, firms’ emissions choices are independent of changes in enforcement strategies. In contrast to emissions trading, however, the “price” of emissions is fixed, so the indirect effect on emissions from enforcement cannot occur. Although this work was motivated primarily by our desire to trace out the direct and market effects of enforcement, we did discover another effect that contradicts a standard theory of compliance behavior. Compliance choices by risk-neutral competitive firms in emissions trading programs should be independent of the initial allocation of permits. This is consistent with the well-known result that the emissions choices of perfectly competitive firms in emissions trading program are independent of initial allocations (Montgomery, 1972).3 Our results contradict both of these conclusions. What appears to matter most here is how the initial allocation of permits determines who will be net sellers of permits and who will be net buyers. Our analysis suggests that net sellers tend to retain more permits and have lower violations and higher emissions than the competitive equilibrium prediction, while net buyers hold fewer permits and tend toward higher violations and lower emissions. Since fewer permits change hands, permit prices tend to be higher than competitive equilibrium predictions. Although experimental techniques have been used to evaluate many other policy initiatives, including some aspects of emissions trading programs (e.g., Cason, 1995, Cason and Plott, 1996 and Isaac and Holt, 1999), these techniques have not yet been widely applied to issues of regulatory enforcement, much less to compliance behavior in emissions trading programs.4 We know of only one other paper that examines emission permit markets when compliance may be imperfect. Cason and Gangadharan's (this issue) experiments involve permit trading when emissions are stochastic, permits can be banked, enforcement is incomplete, and subjects’ performance is audited based on their past compliance history. With this complicated design, they are able to identify interesting interactions between random emissions shocks, permit banking and compliance. Our approach is much simpler: emissions are deterministic, banking is not permitted, and audits are random with a known and constant probability. This approach allows us to generate fundamental results about the direct and indirect effects of different enforcement strategies on compliance and emissions that Cason and Gangadharan do not address. The results of this paper make it clear that the compliance behavior of firms is linked together in emissions trading programs through the normal workings of permit markets. We provide a model of these linkages in the next section. In Section 3 we provide details of the experiments we designed to test for these linkages. The results of the experiments are presented and discussed in Section 4. We conclude in Section 5.