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An Investigation of Compliance Behavior and Enforcement of Emissions Trading Programs Using Experimental Analyses

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This research will design and conduct laboratory experiments to examine compliance behavior in emissions trading programs. Particular emphasis is placed on developing practical guidelines for designing enforcement strategies for emissions trading programs that achieve high rates of compliance cost-effectively.

While there is a substantial body of economic theory about compliance and enforcement in emissions trading programs, and readily available information about how existing emissions trading programs are enforced, there are no empirical analyses of the determinants of compliance decisions in emission trading programs. Furthermore, there are no empirical analyses of various elements of actual or proposed enforcement designs. Toward filling these gaps, the overall objective of this research is to design and conduct laboratory experiments to test a number of hypotheses about compliance behavior and enforcement strategies for emissions trading programs.

Approach:
This research consists of a series of experiments, designed to build upon each other so that the research proceeds seamlessly from testing hypotheses about the determinants of compliance decisions with relatively simple enforcement mechanisms to more complicated designs to evaluate alternative enforcement mechanisms.
Expected Results:

The researchers expect that this research will result in a number of publications in peer-reviewed academic journals. In addition, the investigators will present the results of this research at conferences and in seminars. The research, and efforts to disseminate the results, will provide policy-makers, regulators and researchers with a more comprehensive understanding of compliance behavior and the effectiveness of various enforcement tactics in emissions trading programs than is currently available. This will lead to a better understanding of how market mechanisms and incentives in managing environmental problems should be designed, implemented, and managed to meet environmental quality goals cost-effectively.

Supplemental Keywords:
enforcement, compliance, tradable permits, cap and trade systems, laboratory experiments, cost effectiveness. , Economic, Social, & Behavioral Science Research Program, RFA, Scientific Discipline, Economics and Business, Market mechanisms, Social Science, allowance allocation, allowance market performance, cap and trade systems, compliance behavior, decision making, effects of policy instruments, enforcement and compliance, environmental economics, environmental impact fees, financial mechanisms, impact of federal policy instruments, incentives, market incentives, market-based mechanisms, marketable permits, policy incentives, policy instruments, policy making, pollution fees, socioeconomics

Metadata

EPA/NSF ID:
R829608
Principal Investigators:
Murphy, James
Stranlund, John
Technical Liaison:
Research Organization:
Massachusetts, University of
Funding Agency/Program:
EPA/ORD/Incentives
Grant Year:
2001
Project Period:
January 1, 2002 to December 31, 2003
Cost to Funding Agency:
$227,860
Project Status Reports:
Project Reports:

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