An Experimental Analysis of the Effects of Imperfect Compliance on Technology Adoption

Lidia Vidal‑Meliá*, Carmen Arguedas, Eva Camacho-Cuena, Jose Zofio Prieto

*Corresponding author for this work

Research output: Contribution to journalArticleAcademicpeer-review

Abstract

We present the results of an experimental investigation on incentives to adopt cleaner abatement technologies in the presence of imperfect compliance. We consider two emission control instruments—emission taxes and tradable permits—as well as different combinations of the inspection probability and fine for non-compliance, which can result in full or weak enforcement scenarios. We review and qualify existing theoretical predictions in several ways and find the main result is that allowing for weak enforcement causes tax evasion, reductions in permit prices and lower adoption rates of cleaner abatement technologies. As a result, there are increases in aggregate emissions. Finally, treatments with tradable permits under weak enforcement encounter insufficient trading.
Original languageEnglish
Pages (from-to)425-451
Number of pages27
JournalEnvironmental and Resource Economics
Volume81
Issue number3
DOIs
Publication statusPublished - 2022

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