Environmental regulation and pollution control may clash against the presence of unverifiable tasks, like source-specific emissions. To tackle this issue, we reshape a voluntary agreement instrument, already available in the existing literature, from a dynamic perspective by means of a relational contracting approach. We define a Relational Voluntary Environmental Agreement (RVEA) in an N firms symmetric context, and show that even if emissions are not contractible across firms, and therefore enforcement cannot be delegated to a third party, if firms are sufficiently patient, a self-enforcing RVEA induces the achievement of the environmental objective. Finally, our welfare analysis reveals a notable result: our RVEA can imply less free riding and be welfare-improving with respect to a Voluntary Environmental Agreement enforced by a third party (along the lines of McEvoy, D. M., and J. K. Stranlund. 2010. "Costly Enforcement of Voluntary Environmental Agreements." Environmental and Resource Economics 47: 45-63).

Cesi, B., D’Amato, A. (2023). Relational Voluntary Environmental Agreements with Unverifiable Emissions. THE B.E. JOURNAL OF ECONOMIC ANALYSIS & POLICY, 23(4), 1045-1071 [10.1515/bejeap-2022-0464].

Relational Voluntary Environmental Agreements with Unverifiable Emissions

Berardino Cesi
;
Alessio D’Amato
2023-01-01

Abstract

Environmental regulation and pollution control may clash against the presence of unverifiable tasks, like source-specific emissions. To tackle this issue, we reshape a voluntary agreement instrument, already available in the existing literature, from a dynamic perspective by means of a relational contracting approach. We define a Relational Voluntary Environmental Agreement (RVEA) in an N firms symmetric context, and show that even if emissions are not contractible across firms, and therefore enforcement cannot be delegated to a third party, if firms are sufficiently patient, a self-enforcing RVEA induces the achievement of the environmental objective. Finally, our welfare analysis reveals a notable result: our RVEA can imply less free riding and be welfare-improving with respect to a Voluntary Environmental Agreement enforced by a third party (along the lines of McEvoy, D. M., and J. K. Stranlund. 2010. "Costly Enforcement of Voluntary Environmental Agreements." Environmental and Resource Economics 47: 45-63).
2023
Pubblicato
Rilevanza internazionale
Articolo
Esperti anonimi
Settore SECS-P/02
Settore ECON-02/A - Politica economica
Settore ECON-03/A - Scienza delle finanze
English
relational contracts
environmental policy
unverifiability
Voluntary Environmental Agreement
Cesi, B., D’Amato, A. (2023). Relational Voluntary Environmental Agreements with Unverifiable Emissions. THE B.E. JOURNAL OF ECONOMIC ANALYSIS & POLICY, 23(4), 1045-1071 [10.1515/bejeap-2022-0464].
Cesi, B; D’Amato, A
Articolo su rivista
File in questo prodotto:
File Dimensione Formato  
Cesi D_Amato 2023.pdf

non disponibili

Licenza: Copyright dell'editore
Dimensione 659.63 kB
Formato Adobe PDF
659.63 kB Adobe PDF   Visualizza/Apri   Richiedi una copia

I documenti in IRIS sono protetti da copyright e tutti i diritti sono riservati, salvo diversa indicazione.

Utilizza questo identificativo per citare o creare un link a questo documento: https://hdl.handle.net/2108/397763
Citazioni
  • ???jsp.display-item.citation.pmc??? ND
  • Scopus 0
  • ???jsp.display-item.citation.isi??? 0
social impact