October 3, 2011

The Impact of Informational Costs in Quantity Regulation of Pollutants: The Case of the European Emissions Trading Scheme

by Peter Heindl

- In this paper we present a model that highlights the importance of technological complexity and firm-size in environmental regulation. If regulated firms emit a relatively small amount of pollutants, possible efficiency gains from abatement are also relatively small. If there are high informational costs for abatement options and costs to be identified because of complex technology, small emitters might face a threshold for searching for abatement technology. This could effectively hamper the implementation of existing abatement technologies and the invention of new ones.

Heindl, Peter (2011). "The Impact of Informational Costs in Quantity Regulation of Pollutants: The Case of the European Emissions Trading Scheme." ZEW Discussion Paper No. 11-040.