Voluntary Environmental Investment and Responsive Regulation

Instances of corporate voluntary environmental investments have been rising in recent years. Motivations for such activities include corporate image building, regulatory preemption, and production cost savings. While some of these investments arise from industry attempts to set environmental standar...

Full description

Saved in:
Bibliographic Details
Published in:Environmental & resource economics 2006-04, Vol.33 (4), p.425-439
Main Authors: Maxwell, John W, Decker, Christopher
Format: Article
Language:English
Subjects:
Audit departments
Auditing
Auditing procedures
Business strategies
Capital expenditures
Compliance
Corporate image
Cost control
Cost minimization
Economic models
Enforcement
Environmental management
Environmental performance
Environmental policy
Environmental regulations
Game theory
Investment
Motivation
Regulation
Studies
U.S.A
Citations: Items that this one cites
Items that cite this one
Online Access:Get full text
Tags: Add Tag
No Tags, Be the first to tag this record!
Description
Summary:Instances of corporate voluntary environmental investments have been rising in recent years. Motivations for such activities include corporate image building, regulatory preemption, and production cost savings. While some of these investments arise from industry attempts to set environmental standards where none currently exist, many investments seem to be aimed at reducing the costs of complying with existing regulations. Using a simple game-theoretic model, we investigate firm motivations for, and welfare consequences of, these types of voluntary investments by focusing on the role regulatory enforcement might play. We find that such investments unambiguously increase when an enforcement regulator acts as a Stackelberg follower (a regulatory structure we refer to as responsive regulation) in setting its monitoring and enforcement strategy. These additional investments may be socially undesirable, necessitating a restructuring of non-compliance penalties. Copyright Springer 2006
ISSN:0924-6460
1573-1502
DOI:10.1007/s10640-005-4992-z