مقررات بحران های زیست محیطی، مجوزهای قابل تجارت و پذیرش فن آوری های نوین

There are many situations where environmental authorities use a mix of environmental policy instruments, rather than one single instrument, to address environmental concerns. For example, one instrument may be used to reduce overall emissions of a pollutant while another is used to address environmental crises that arise when meteorological conditions affect the capability of the environment to assimilate pollution. This paper looks at the effects of the interaction of a tradable permits scheme with environmental crises’ regulations on the rate of adoption of advanced abatement technologies.

In some cases, the damages caused by emissions of pollutants depend almost exclusively on their magnitude and on the number of persons whose location makes them vulnerable to the effects. However, under many other circumstances, the effects of a given discharge depend on variables beyond the control of those directly involved. For example, amount of water and speed of flow are critical determinants of a river's assimilative capacity. Similarly, emission levels that are acceptable and rather harmless under usual conditions can become intolerable if temperature inversion prevent air pollution from leaving the atmosphere (Baumol and Oates, 1988, pp. 191–192). Variability in the assimilate capabilities of the environment poses difficult problems for pollution control policies (Howe and Lee, 1983) since changes may cause occasional environmental crises that prompt the imposition of emergency measures to improve environmental quality to a satisfactory level. Typically, these crises cannot be predicted far in advance or with certainty – but we can be certain that at some unforeseen time they will recur. The use of a single policy as the only means of control may be unacceptably costly to society since it would have to be set at a level that is high enough to maintain the pollution at acceptable levels during emergency periods. Instead, it may be less costly to employ a mixed policy in which one policy is used to control the long-run equilibrium level of pollution and another is used to maintain the pollution below some predetermined threshold during environmental crises (Bawa, 1975 and Baumol and Oates, 1988, p. 200). In fact, several cities have already defined and formulated corresponding policies measures for periods of environmental distress. This is the case – for example – of the Hudson River on the east coast of Australia, where a system of tradable permits was introduced in 1995 to control the saline wastewater discharged by industrial activity. However, the trading scheme operates only during high flows. No discharge at all is allowed during low flows since the river cannot dilute emissions adequately (NSW EPA, 2003). A similar mixed policy is applied in Santiago, Chile. A system of tradable permits was introduced during the early 1990s to reduce emissions of particulate matter coming from stationary sources of air pollution. Nevertheless – since during some winter days the stagnant air traps and collects atmospheric pollutants until they become a danger to health – the scheme was complemented with an “emergency emission standard” that further restricts emissions during declared states of “environmental emergencies” of bad air quality that occur when an environmental quality index reaches high values (Coria, 2009). Finally, although the focus of this paper is pollution, the variability of water flows impose similar challenges for water management during droughts. Tradable water rights schemes are in place in several countries as a mechanism to efficiently allocate water resources (for example, Australia, United States and Chile; see Kraemer and Banholzer, 1999). Nevertheless, during droughts, conventional water-rationing schemes restrict each household or enterprise to water use below a given level.1 In spite of that these mixed systems of tradable permits and emission standards may induce with little uncertainty the prescribed alterations in pollution activities, the theory of environmental regulation suggests that market-based instruments create more effective technology adoption incentives than conventional regulatory standards.2 Then, it is worth asking to what extent the interaction of policies preserves the economic incentives provided through tradable permits; especially if the incidence of environmental crises and the “relative use” of environmental crises’ regulation within the mix vary. The present paper is an attempt to answer such question that seems very timely, given the growing interest in the use of tradable permits worldwide and the fact that in many cases, tradable permits might have to interact with complementary policies that affect the same industry.3 In line with previous studies (Milliman and Prince, 1989, Jung et al., 1996, Parry, 1998, Montero, 2002a, Requate and Unold, 2001, Requate and Unold, 2003 and Coria, 2009b), I find that under a tradable permit scheme the adoption of advanced abatement technologies depreciates the emissions’ permit price. Since firms with higher costs of adoption can free ride on the decreased permit price caused by other firms’ adoption, the private gains from adopting the technology under permits are reduced and so the rate of adoption. However, I show that if the tradable permit scheme is complemented with an environmental crises’ regulation, the larger adoption savings resulting from the additional abatement induced by the environmental crises’ regulation, i.e. “abatement effect”, offsets the smaller adoption savings resulting from the reduced price, i.e. “price effect”. Then, both effects set against themselves and the final rate of adoption depends on the extent to which each effect offsets the other and on the incidence of environmental crises. If the regulator uses a mix of tradable permits and environmental crises’ emission standards, the relative importance of the “price effect” decreases as the incidence of environmental crises increases; since the chances of using permits instead of buying the new technology become very low, firms have no choice but to adopt the new technology. On the other hand, if the regulator uses instead a theoretically more efficient mixed policy, as – for example – a system of tradable permits where a “regular” trading program would encourage the target emission reduction during normal periods and an “environmental crises” trading program would encourage the target emission reduction during periods of environmental distress4 – the “price effect” would increase with the incidence of environmental crises, offsetting the “abatement effect” to a larger extent and reducing the rate of adoption. Thus, there is a critical incidence of environmental crises determining the effects of the interaction of tradable permits and environmental crises’ regulations over the rate of adoption. If the incidence of environmental crises is low, then a mix of tradable permits and emission standards leads to a rate of adoption that is lower than the optimal. Quite the opposite, if the incidence of environmental crises is high, then this mix induces firms to over-adopt. The model in this paper is simplified in a number of respects to keep the analysis tractable. For example, the analysis is for a flow rather than a stock pollutant that accumulates in the environment, as carbon dioxide. Also, the results rely on the assumption that transaction, monitoring and enforcement costs are similar in different mixed policies, so they can be omitted from the analysis. Although these issues might affect the optimality of mixed policies in practice, the analysis provides a useful starting point for assessing the economic incentives provided by them. Besides, to my knowledge, this paper is the first theoretical attempt studying the effects of the use of complementary policies on the dynamic properties of tradable permits. This paper is organized as follows. The next section introduces the adoption model. Section 3 analyzes the adoption incentives under different mixed policies when the incidence of environmental crises is exogenous. Section 4 analyzes the adoption incentives under mixed schemes when the incidence of environmental crises is endogenous, i.e. it can be reduced through the adoption of new technology. Section 5 presents a numerical example to illustrate the main results. Section 6 concludes the paper.

Environmental regulations are likely to operate in parallel with other environmental regulations and to interact with them in several ways. The purpose of this paper is to analyze the effects of the interaction of tradable permits with environmental crises’ regulations on the rate of adoption of advanced abatement technologies. In the area of technological diffusion there is an apparent maxim that seems to underlie environmental policy; that more and faster diffusion of more environmentally friendly technologies is always better. Nevertheless, from a welfare point of view, the optimal rate must balance the investment costs and the benefit of adoption in terms of increasing abatement across firms and reducing the abatement costs. It is shown that if the incidence of environmental crises is exogenous, mixing direct regulations (i.e. emission standards) with tradable permits induces an inefficient rate of adoption, while the use of a system of tradable permits maximizes social welfare. It is also shown that if the incidence of environmental crises is endogenous, the rate of adoption that maximizes social welfare is reduced and that a mixed scheme of tradable permits and emission standards could eventually offer a higher level of social welfare than the alternative approach if the incidence of environmental crises is low. If additional policy instruments are need to deal with a pollution problem, regulators should look for a “complementary” policy that preserve the benefits of the existing policy to the greatest possible extent and should be administratively feasible at a reasonable cost. The results in this paper show that the incentives provided by tradable permits might be affected to a large extent by the use of policy mixes via two counteracting effects: the “abatement effect” – that gives account of the direct effect of the interaction of policies on adoption savings and rate of adoption, and the “price effect”, that gives account of the effect of the increased availability of technology on the permit price. The fact that changes in the firms’ constraints induce firms to modify their abatement behavior – and by that means affect the adoption savings, the permit price and the incentives provided to technology adoption – implies that it is difficult to preserve de dynamic properties of this instrument by the use of complementary policies. Although such result may not unexpected, it has an important policy implication in terms of avoiding such mixes when possible. On the other hand, although it is intuitive to say that the interaction of environmental crises’ regulations and tradable permits might induce firms to overinvest, in this paper I have shown that interaction might equally lead firms to under-invest. This outcome might occur when the incidence of environmental crises is low. Instead, there will be overinvestment when environmental crises are often.