Leadership

How Green Should Environmental Regulators Be?

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Executive Summary

The extent to which environmental regulatory institutions are either 'Green' or 'Brown' impacts not just the intensity of regulation at any moment, but also the incentives for the development of new pollution-control technologies. The authors set up a strategic model of R&D in which a polluter can deploy technologies developed in-house, or license technologies developed by specialist outsiders. Polluters exert R&D effort and may even develop redundant technologies to improve the terms on which they procure technology from outside. They find that, while regulatory bias has an ambiguous impact on the best-available technology, strategic delegation to systematically biased regulators can improve social welfare.

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