Technology diffussion under perfect and imperfect emission monitoring

Abstract

This paper presents the results of an experimental investigation on incentives to adopt advanced abatement technologies in the presence of perfect and imperfect monitoring. Our experimental design mimics an industry with small polluting firms regulated by pollution taxes. We consider two probabilities of inspection and we compare them. Our results suggest that introducing imperfect monitoring triggers non-compliance, which is not fully offset by the fines. However, the aim of reducing aggregated emissions through investment in new technology is achieved, especially thanks to the investment of the dirtiest firms.