پذیرش اولیه و مداوم و تجاری کردن بین نظارت و کنترل هزینه

The trade-off between firm abatement costs and regulatory monitoring costs modeled by Amacher and Malik [1, 2] (AM) is reinterpreted, extended, and critiqued in part. The notion of technology is replaced with the quantity of abatement capital, and a constant fine per unit is replaced with a “lump-sum” maximum total fine. Analysis of first- and second-best regulatory situations indicate that the first-best allocation involves a higher capital-to-labor ratio than that which would minimize the firm's costs of meeting the standard. The relationship between initial and continuing compliance is analyzed, the curvature of iso-abatement curves is related to the extent of net cost-saving possible from more capital-intensive abatement, and the effect of a delayed commitment to the pollution standard by the regulator is considered. AM's comparison of pollution taxes versus pollution standards fails to hold up under the modified assumption on fines.

One of the most fundamental sets of reasons for costly enforcement of pollution control laws is that maximum fines are finite and monitoring is costly. In response, economists have examined the potential for reducing social cost by the use of more elaborate monitoring approaches. One approach that was studied under various ancillary assumptions by Russell et al. 17, Russell 16, Harrington 10, Harford and Harrington 8, and Harford 6 is the use of state-dependent enforcement strategies whereby future monitoring and penalties facing a firm are made a function of past monitored compliance. It has been well documented by the aforementioned writings that state-dependent enforcement offers the possibility of lower expected steady-state enforcement costs, although the last two articles referred to indicate that there tends to be a partially offsetting increase in expected steady-state control costs, ceteris paribus. Taking a different approach, Kaplow and Shavell 12 and Malik 15 have shown that making the firm self-report its own wastes with monitoring performed probabilistically only on those firms claiming compliance leads to lower enforcement costs for a given level of pollution under at least some circumstances. More recently, Amacher and Malik 1, 2, ŽAM. have presented papers which emphasize the possibility of lowering social cost through bargaining between the regulator and the polluting firm. Their papers use a static framework of costly but perfect enforcement of regulatory instruments. The regulator and firm bargain from a ‘‘second-best’’ allocation based on the regulator’s ability to pre-commit to only a pollution standard. The ‘‘first-best’’ allocation requires the regulator to pre-commit to both a ‘‘technology’’ Žabatement capital. standard and a pollution standard. Bargaining can reduce social cost by offering a regulatory easing of the pollution standard in exchange for the firm using relatively more of the costlessly observable abatement capital.2 The saving in pollution monitoring cost can more than compensate for the rise in the sum of pollution damage and control costs. The premise that performance standards are ‘‘second-best’’ is striking, given that economists have often argued that performance standards were superior to ‘‘technology’’- based standards precisely because they ensured that firms eliminated pollution at the least cost Žto the firm.. It is the intent of this article to restate the basis for the gains from adjusting the firm’s choices of abatement inputs and to offer additional analysis in order to clarify the nature of the trade-offs involved. To begin with, for a static model with end-of-pipe types of treatment, a change of terminology can be justified. In place of AM’s choice variables of technology and pollution, the firm’s choice variables are here assumed to be the inputs of capital and a short-run variable input labeled ‘‘labor.’’3 This allows us to view the novel aspect of the regulatory issue as one involving the desire to induce the firm to choose a capital-intensive abatement process in order to reduce monitoring costs. As part of this approach, the issue of initial compliance is examined so as to clarify the assumptions regarding the circumstances under which it is achieved and the implications of its achievement for the range of choices under continuing compliance. The idea of initial compliance has been mentioned and briefly dis- cussed in a number of works, including Field 3 and Russell et al. 17, and by Harrington 11 nearly 20 years ago. However, it appears that no explicit theoretical analysis has been done on this matter, presumably because initial compliance has been seen as relatively easy to achieve. Nevertheless, even the relatively simple approach taken here indicates that consideration of initial compliance yields some additional insights into enforcement trade-offs. Under assumptions similar to AM’s except that the Žmaximum. fine is a ‘‘lumpsum’’ total rather than a rate per unit of excess or untaxed pollution, it is shown that initial compliance requires that the fine per period must equal or exceed the sum of abatement capital and operating costs. This additional constraint has implications for the optimal pollution monitoring probability and the optimal combination of inputs in the first-best allocation ŽCase I.. The ‘‘second-best’’ optimal pollution standard also satisfies a somewhat different marginal condition due to the modified assumption on the fine ŽCase II.. It is also shown, intuitively enough, that the less the degree of substitutability between capital and operating inputs Žthe more sharply curved the abatement isoquants., the less reduction in social cost is possible from trying to shift the firm’s use of inputs toward capital. The role of pre-commitment is further explored by assuming that the regulator is unable to commit to a specific pollution standard until after the firm has chosen its level of abatement capital. If the regulator can still pre-commit to an abatement capital standard ŽCase III., one gets the result that the pollution standard is either the same or more strict. When the regulator cannot pre-commit to a standard on abatement capital, the result is a drastic reduction in the ability of the regulator to enforce any standard stricter than the no-regulation level. The assumption that the total fine per period is limited, rather than the rate per unit of excess pollution, is one with both a tradition and a strong rationale. Harford 6, Harford and Harrington 8, Harrington 10, Kaplow and Shavell 12, Malik 15, Swierzbinski 21, and Viscusi and Zeckhauser 23 all assume that there is a limit on the total penalty that can be imposed on the firm. Papers such as Harford 7 and Garvie and Keeler 4 follow Žroughly. AM in using fine functions with no explicit upper bound on the size of the penalty for non-compliance. However, it would seem incontrovertible that there is an upper limit on the amount of fine collectible from a firm in a given time period before it is essentially put out of business or confiscated by the government. In fact, many of the papers mentioned assume a simple penalty structure wherein the fine jumps from zero to the maximum possible with the first unit of pollution emitted beyond the standard. While in general this is not a realistic fine function, it can be defended in this context. Harford 9 showed that when the regulator knows the firm’s cost function of abatement with certainty, measurement of pollution is accurate and costly, and the total penalty is limited, then a fine schedule which goes from a zero level to its maximum when pollution exceeds a threshold is one which minimizes social cost. This type of model produces costly but perfect enforcement, a feature common to the AM papers and this one. Given these considerations, it is noteworthy that the analysis to follow shows that a comparison of the regulatory instruments of standards versus taxes has a substantially different character if the ‘‘lump-sum’’ fine approach is used instead of the constant per-unit fine assumption of AM.

If regulators had the power to determine precisely how much capital Žand possibly what kind. constitutes initial compliance, then the process of negotiation from a second-best threat point is unnecessary. However, for AM’s and the present version of second-best standard setting to be logically consistent, it must be true that the regulator can costlessly and accurately measure the quantity of abatement capital that the firm installs. If a regulator had such monitoring capabilities, it could be seen as arbitrary that he would not be allowed to use them to achieve first-best outcomes. Obviously, there could be many reasons for restraining regulatory discretion, and, in any case, empirical knowledge of regulatory discretion regarding the trade-offs considered here does not appear to be very precise. To the degree that monitoring abatement capital is relatively cheaper than monitoring pollution, there is an argument against the universal use of instruments such as tradable pollution permits which presume a relatively unchanging perfor mance standard for each firm. Yet, Title IV of the Clean Air Act Amendments of 1990 created the ability for electric utilities to trade pollution emission allowances in sulfur dioxide. Schmalensee et al. 20 discuss the outcomes of the program and mention that the required continuous monitoring had an average annual cost of about $124,000 per source Žp. 55.. In the period discussed, there were approximately 440 sources for an estimated total annual monitoring cost of $54.6 million. The annual savings from the program due to the reduction in total cost of controlling emissions were placed in the range $225 to $375 million per year Žp. 64.. While these numbers are not precise, it would seem that savings in monitoring cost from using low-cost observations on abatement capital would not, in this case, justify a move away from standards based on emissions alone. Of course, these savings are based upon electric utilities being able to make trades based upon cost information that regulators could not know, or were unable to use, in setting the individual firm standards in the first place, an informational situation not reflected in the AM papers or this one. In other contexts, including the early days of pollution regulation, the accuracy and costliness of monitoring emissions directly could well offer a justification for ‘‘technological’’ standards to a greater degree than that suggested by this example and many environmental economics textbooks. The reality is that continuous compliance has been relatively less common than initial compliance. One needs a more complicated model than the one offered here to account for such a pattern. Such a model would have elements of asymmetric information, symmetric uncertainty, or both. To consider one scenario, suppose firms vary Žonly. in their abatement production functions in ways not observable by the regulator. In this setting, the regulator would presumably set a common capital standard, a common pollution standard, and a common monitoring probability for all firms. Given that it will probably not be worthwhile to have the monitoring probability high enough to ensure compliance for firms of the highest cost types, some firms may comply with the capital standard and not the pollution standard. Letting K1 be the capital standard, p1 be the monitoring probability, and L1i be the amount of labor needed for firm i to comply with the pollution standard s1, firm i will comply with the capital standard and not comply with the pollution standard when the inequalities ŽrK1p1F.F and p1FwL1i both hold. Two other features that may account for high initial compliance with much lower rates of continuing compliance are uncertainty of pollution measurement and uncertainty of pollution control compared to the relative certainty of these dimensions with regard to control capital. Given the costliness of accurate measurement of pollution, the optimal accuracy is likely to leave significant random error in measuring pollution. Since an operational standard can only be based on such measurement, there are bound to be ‘‘violations’’ simply due to random measurement error. Thus, differences in measurement accuracy could account for some differences in violation rate. The argument involving controllability is very similar. ‘‘Random’’ variations in pollution due to equipment failures will sometimes lead to violations of any given pollution standard. Of course, if one could measure ‘‘effort’’ to control pollution with perfect accuracy and low cost, then a standard based on effort would avoid this issue. One expects that more formal analyses along these lines, combined with additional information on actual trade-offs, will clarify the value of these ideas in modeling the observed pattern of compliance.