AMBEC Stefan

We propose informational spillovers as a new rationale for the use of multiple policy instruments to mitigate a single externality. We investigate the design of a pollution standard when the firms’ abatement costs are unknown and emissions are taxed. A firm might abate pollution beyond what is required by the standard by equalizing its marginal abatement costs to the tax rate, thereby revealing information about its abatement cost. We analyze how a regulator can take advantage of this information to design the standard. In a dynamic setting,the regulator relaxes the initial standard in order to induce more information revelation, which would allow her to set a standard closer to the first best in the future. Updating standards, though, generates a ratchet effect since a lowcost firm might strategically hide its cost by abating no more than required by the standard. We characterize the optimal standard and its update across time depending on the firm’s abatement strategy. We illustrate our theoretical results with the case of NOx regulation in Sweden. We find evidence that the firms that pay the NOx tax experience more frequent standard updates and more stringent revisions than those who are exempted.

To contribute to the goal of containing global warming to 1.5°C, the French government has adopted the objective of zero net greenhouse gas emissions by 2050. As the main greenhouse gas is carbon dioxide, and most CO2 emissions are due to the combustion of fossil fuels, this thesis focuses on achieving carbon neutrality of French energy-related CO2 emissions by 2050. This thesis aims to study the relative role of different low-carbon options in the energy sector to achieve carbon neutrality. Specifically, this thesis first studies the French power sector, first in a fully renewable system, and then in one incorporating other mitigation options, i.e. nuclear power and carbon capture and storage. I study the impact of uncertainties related to the development of renewable energy costs and storage options and address the robustness of an all-renewable power system to cost uncertainties. Later, adding other low-carbon options in the electricity sector, I analyze the relative role of different options. Similarly, to encourage investment in renewable energy sources such as wind and solar power, I study the investment risk associated with the volatility of prices and volumes of renewable electricity technologies, and the performance of different public support schemes. The analysis in this thesis goes beyond the power system and also considers the entire energy system in the presence of sectoral coupling. During this thesis, I have developed a family of investment and operation optimization models to answer different questions concerning the French energy transition. These models minimize the cost of the considered system (power system or energy system as a whole) by satisfying the supply/demand balance at each hour for at least one year, respecting the main technical, operational, resource and land use constraints. Thus, the short and long term variability of renewable energies is taken into account. Using these models, I answer the questions raised above. These models are not used to find a single optimal solution, but several optimal solutions under different scenarios of weather conditions, costs, energy demand, and technology availability. Therefore, the importance of robustness to uncertainties is central to the methodology used, as well as optimality. The results of my thesis show that renewable energy sources are the main enablers of the energy transition, not only in the power system but also in the whole energy system. While the elimination of nuclear power only marginally increases the cost of a carbon-neutral energy system, the elimination of renewables is associated with high inefficiencies in both costs and emissions. In fact, if renewable gas is not available, even a social cost of carbon of €500/tCO2 will not be sufficient to achieve carbon neutrality. This is partly due to the negative emissions it can produce with carbon capture and storage, and partly due to the economics of internal combustion engines fueled by renewable gas. The central message of this thesis is that achieving carbon neutrality at the lowest cost requires a largely renewable energy system. Therefore, if we are to prioritize investments in low-carbon options, renewable gas and electricity technologies are of utmost importance.

The presence of consumers able to respond to changes in wholesale electricity prices facilitates the penetration of renewable intermittent sources of energy such as wind or sun power. We investigate how adapting demand to intermittent electricity supply by making consumers price-responsive - thanks to smart meters and home automation appliances - impacts the energy mix. We show that it almost always reduces carbon emissions. Furthermore, when consumers are not too risk-averse, demand response is socially beneficial because the loss from exposing consumers to volatile prices is more than offset by lower production and environmental costs. However, the gain is decreasing when the proportion of reactive consumers increases. Therefore, depending on the costs of the necessary smart hardware, it may be non-optimal to equip the whole population.

This paper examines an informed principal-agent game with ex post participation constraints for the agent. It shows that the players do not lose by communicating in turn among themselves rather than simultaneously if and only if the principal communicates first. It then considers every Bayesian incentive compatible allocation rules that assign nonnegative payoffs for one player in a bilateral asymmetric information framework. It provides necessary and sufficient conditions for sequential communication to be as efficient as simultaneous communication in implementing these allocation rules when the player with unbounded payoffs moves first.

A group of agents enjoy concave and single-peak benefit functions from consuming a shared resource. They also value money (transfers). The resource is scarce in the sense that not everybody can consume its peak. The paper characterizes the unique (resource and money) allocation that is efficient, incentive compatible and equal sharing individual rational. It can be implemented (i) by selling the resource or taxing extraction and redistributing the money collected equally, or (ii) by assigning property rights on equal shares in a competitive market. Next, the paper posits an allocation that is incentive compatible, individual rational and assigns to every agent no more than its peak benefit.

We test in the laboratory three instruments designed to regulate the exploitation of a common resource by heterogeneous agents: a system of taxes and subsidies, individual transferable and non-transferable quotas. We propose a model in which the objective assigned to these instruments is to reduce the exploitation of the resource compared to an open access regime, without reducing the profit of the users. While each of the instruments achieves the reduction objective on average, the instruments do not have the same effects on the levels and distribution of profits. The system of taxes and subsidies selects the most efficient users, but increases the inequality of individual profits. On the other hand, neither instrument improves profits in the strict Pareto sense, although by this criterion the two market instruments perform better than non-transferable quotas.

The authors analyze the hydroelectricity production by n power plants in a dynamic model. The production of each plant is constrained by the supply constraint and the storage constraint. They derive the monopoly and imperfect competition solutions. They show that hydroelectric production can be affected by two sources of inefficiency: suboptimal management of water resources and the exercise of market power. A monopolist minimizes the first source of inefficiency while imperfectly competitive generation minimizes the second. The decision to introduce competition into hydropower generation must take into account both of these effects.

The paper analyzes an entrepreneur-investor relationship in a stylized model in which (i) financial needs, unknown ex ante, occur sequentially, (ii) a major decision must be made at project maturity, (iii) this decision depends on private information held by the entrepreneur but observable by the investor at some cost. The two partners agree on a governance system including a sharing of future cash flows and an allocation of control over the investment decision. The article shows that control should be given to the entrepreneur for low levels of investment, but that it should be transferred to the investor when the investment exceeds a certain threshold.

This paper considers environments in which several agents (countries, farmers, cities) share water from a river. Each agent enjoys a concave benefit function from consuming water up to a satiation level. Noncooperative extraction is typically inefficient and any group of agents can gain if they agree on how to allocate water with monetary compensations. The paper describes which allocations of water and money are acceptable to riparian agents according to core stability and several criteria of fairness. It reviews some theoretical results. It then discusses the implementation of the proposed allocation with negotiation rules and in water markets. Lastly, it provides some policy insights.

Jaffe and Palmer (1997) present three distinct variants of the so-called Porter Hypothesis. The “weak” version of the hypothesis posits that environmental regulation will stimulate certain kinds of environmental innovations. The “narrow” version of the hypothesis asserts that flexible environmental policy regimes give firms greater incentive to innovate than prescriptive regulations, such as technology-based standards. Finally, the “strong” version posits that properly designed regulation may induce cost-saving innovation that more than compensates for the cost of compliance. In this paper, we test the significance of these different variants of the Porter Hypothesis using data on the four main elements of the hypothesised causality chain (environmental policy, research and development, environmental performance and commercial performance). The analysis is based upon a unique database which includes observations from approximately 4200 facilities in seven OECD countries. In general, we find strong support for the “weak” version, qualified support for the “narrow” version, and qualified support for the “strong” version as well.

A group of agents must share the water of a river along which they are located. Monetary compensations are allowed. The authors show that the cooperative game associated with this problem is convex: its kernel is therefore large and easy to describe. They propose the following fairness criterion: no group of agents should obtain a welfare higher than the one they could obtain in the absence of the others. The authors show that only one distribution in the kernel satisfies this criterion.

The presence of consumers able to respond to changes in wholesale electricity prices facilitates the penetration of renewable intermittent sources of energy such as wind or sun power. We investigate how adapting demand to intermittent electricity supply by making consumers price-responsive - thanks to smart meters and home automation appliances - impacts the energy mix. We show that it almost always reduces carbon emissions. Furthermore, when consumers are not too risk-averse, demand response is socially beneficial because the loss from exposing consumers to volatile prices is more than offset by lower production and environmental costs. However, the gain is decreasing when the proportion of reactive consumers increases. Therefore, depending on the costs of the necessary smart hardware, it may be non-optimal to equip the whole population.

According to Porter's hypothesis, strict environmental regulations should have a positive impact on the productivity of affected firms. The authors review the theoretical and empirical arguments surrounding this hypothesis. They show that there is little strong theoretical support for this hypothesis but that recent theoretical developments (such as the theory of the firm) offer interesting insights. Empirically, most of the evidence suggests that, overall, environmental regulations have a rather negative impact on the firms subject to them. However, this research has many limitations, including a lack of a theoretical framework. In addition, the productivity measures used are generally inadequate since they do not explicitly account for the existence of undesirable outputs. The authors review recent work on green productivity measures. From this review of the literature, the authors conclude that while one should remain skeptical of this hypothesis, it is still premature to reject it completely.

The conventional wisdom about environmental protection is that it comes at an additional cost on firms imposed by the government, which may erode their global competitiveness. However, during the last decade, this paradigm has been challenged by a number of analysts. In particular, Porter (Porter, 1991. Porter and van der Linde, 1995) argues that pollution is often associated with a waste of resources (material, energy, etc.), and that more stringent environmental policies can stimulate innovations that may compensate for the costs of complying with these policies. This is known as the Porter hypothesis. In fact, there are many ways through which improving the environmental performance of a company can lead to a better economic or financial performance, and not necessarily to an increase in cost. To be systematic, it is important to look at both sides of the balance sheet.First, a better environmental performance can lead to an increase in revenues through the following channels: i) a better access to certain markets. ii) the possibility to differentiate products and iii) the possibility to sell pollution-control technology. Second, a better environmental performance can lead to cost reductions in the following categories: iv) regulatory cost. v) cost of material, energy and services (this refers mainly to the Porter hypothesis). vi) cost of capital, and vii) cost of labour. Although these different possibilities have been identified from a conceptual or theoretical point of view for some time (Reinhardt, 2000. Lankoski, 2000, 2006), to our knowledge, there was no systematic effort to provide empirical evidences supporting the existence of these opportunities and assessing their “magnitude”. This is the objective of this paper. For each of the seven possibilities identified above [i) through vii), we present the mechanisms involved, a systematic view of the empirical evidence available, and a discussion of the gaps in the empirical literature. The objective of the paper is not to show that a reduction of pollution is always accompanied by a better financial performance, it is rather to argue that the expenses incurred to reduce pollution can sometime be partly or completely compensated by gains made elsewhere. Through a systematic examination of all the possibilities, we also want to identify the circumstances most likely to lead to a “win-win” situation, i.e., better environmental and financial performance.

With diminishing global water reserves the problem of water allocation becomes increasingly important. The authors consider the problem of efficiently sharing a river among a group of satiable countries. Inducing countries to efficiently cooperate requires monetary compensations via international agreements. They show that cooperation of the other countries exerts a positive externality on the benefit of a coalition. The problem is to distribute the benefit of efficiently sharing the river under these constraints. If the countries outside of a coalition do not cooperate at all, then the downstream incremental distribution is the unique compromise between the absolute territorial sovereignty (ATS) doctrine and the unlimited territorial integrity (UTI) doctrine. If all countries outside a coalition cooperate, then there may not exist any distribution satisfying the UTI doctrine.

This paper examines the implementation of Bayesian allocation rules that satisfy the non-negative ex-post payoff constraint for a player in a two-player model with two-way asymmetric information. He shows that, under general conditions, these allocations can be implemented by a sequential mechanism in which the players communicate their information one after the other. Moreover, when the allocation rules are negotiated ex ante, the order is important: the player who communicates first must have bargaining power or unbounded ex post payoffs.

The paper presents in a non-technical way some of the possible theoretical underpinnings of Porter's hypothesis that strict environmental regulations can improve the profit of industries subject to them. After a brief presentation of the hypothesis, the arguments based on the existence of imperfections within the firm are reviewed. The market imperfections that could potentially justify Porter's hypothesis are then discussed. The main conclusions of this overview are: (i) the Porter hypothesis requires the interaction of the environmental externality with at least one other source of distortions, (ii) the type of public intervention that can lead to a Porter effect depends on the nature of the interacting distortions. Achieving the optimum may require the use of several instruments, (iii) the empirical exploration of the Porter hypothesis must, to be valid, allow for the presence of these multiple distortions.

The French abstract was not provided by the author.

Environmental markets distribute tradable rights on natural resources that are available for free on the earth such as water, biomass or clean air. In a framework where users differ solely in respect of their access to the resource, I investigate the allocation of rights that are accepted in the sense that, after trading, users obtain at least what they can achieve by sharing the resources they control. I show that, among all accepted rights, the more egalitarian ones do not allow any redistribution among users. Consequently, compared to an efficient allocation of resources, the net trading of rights always increases inequality.

The presence of consumers able to respond to changes in wholesale electricity prices facilitates the penetration of renewable intermittent sources of energy such as wind or sun power. We investigate how adapting demand to intermittent electricity supply by making consumers price-responsive-thanks to smart meters and home automation appliances-impacts the energy mix. We show that it almost always reduces carbon emissions. Furthermore , when consumers are not too risk-averse, demand response is socially beneficial because the loss from exposing consumers to volatile prices is more than offset by lower production and environmental costs. However, the gain is decreasing when the proportion of reactive consumers increases. Therefore, depending on the costs of the necessary smart hardware, it may be non-optimal to equip the whole population.

To reduce the competition from farmers who self-produce seed, an inbred line seed producer can switch to nondurable hybrid seed. In a two-period model we investigate the impact of crop durability on self-production, pricing and switching decisions, and we examine the impact of license fees paid by self-producing farmers. First, in an inbred line seed monopoly model, we find that the monopolist may produce technologically dominated hybrid seed in order to extract more surplus from farmers. Further, the introduction of license fees improves efficiency. Second, we study how the monopolist's behavior is affected by the entry of a nondurable hybrid seed producer. We show that the inbred line seed producer might benefit from competing with a technologically dominated hybrid seed producer, as this allows for consumers' discrimination.

We propose informational spillovers as a new rationale for the use of multiple policy instruments to mitigate a single externality. We investigate the design of a pollution standard when the firms' abatement costs are unknown and emissions are taxed. A firm might abate pollution beyond what is required by the standard by equalizing its marginal abatement costs to the tax rate, thereby revealing information about its abatement cost. We analyze how a regulator can take advantage of this information to design the standard. In a dynamic setting, the regulator relaxes the initial standard in order to induce more information revelation, which would allow her to set a standard closer to the first best in the second period. Updating standards, though, generates a ratchet effect since the low-cost firms might strategically hide their cost by abating no more than required by the standard. We provide conditions for the separating equilibrium to hold when firms act strategically. We illustrate our theoretical results with the case of NO x regulation in Sweden. We find evidence that the firms that are taxed experience more frequent standard updates.

Is green consumerism beneficial to the environment and the economy? To shed light on this question, we study the political economy of environmental regulations in a model with neutral and green consumers where the latter derive some warm glow from buying a good of higher environmental quality produced by a pro…t-maximizing monopoly, while the good bought by neutral consumers is provided by a competitive fringe. Consumers unanimously vote for a standard set at a lower than first-best level, or for a tax delivering the first-best environmental protection level. Despite its under-provision of environmental protection, the standard dominates the tax from a welfare perspective due to its higher productive efficiency, i.e., a smaller gap between the environmental qualities of the two goods supplied. In stark contrast, voters unanimously prefer a tax to a standard when the willingness to pay for greener goods is small enough.

This thesis investigates the conditions for the realization of a decarbonized and sustainable industrial civilization, by studying some aspects of its physical feasibility and political acceptability. Chapter 1 studies the evolution of the energy rate of return in different prospective scenarios, and predicts that the overall efficiency of the electricity sector to provide surplus energy would be halved in a 100% renewable scenario. Chapter 2 highlights the importance of metal recyclability in a model of optimal metal and fossil extraction for energy production. The appendix to Chapter 2 extends the Karush-Kuhn-Tucker theorem to the case of a convex series under a finite number of constraints. Chapters 3 and 4 are based on a survey of a representative sample of three thousand French people, conducted during the Gilets jaunes movement. Chapter 3 examines beliefs about a carbon tax with dividend, a measure touted to combat climate change because of its efficiency and progressivity. If 70% reject the tax with dividend, it is because of pessimistic perceptions about its properties: in contradiction with the micro-simulations carried out, most believe that their household would lose purchasing power as a result of the reform, and perceive it as regressive and ineffective in reducing pollution and fighting climate change. Chapter 4 analyzes knowledge, perceptions, and values related to climate change, examines opinions about carbon taxation, and assesses support for other climate policies.

The European carbon market (ETS) is the cornerstone of European climate policy. However, carbon prices have long been considered too low and volatile to trigger the investments needed for a sustainable decarbonization of the economy. Low price levels have largely been attributed to an imbalance in the supply of permits due to external shocks to the market. Several supply restriction measures, criticized in the first chapter, were thus undertaken in order to preserve the ETS. However, most prospective analyses of the EU ETS are based on an archetypal model of permit trading, which does not take into account the internal structure of the market or its fundamentals. This thesis thus aims to identify the structural determinants of the carbon price on the EU ETS, as well as to assess its impact on market equilibrium and supply-side policy design. Motivated by the examination of microeconomic transaction and emission data, the second and third chapters conduct an ex-post analysis of Phases 2 (2008-2012) and 3 (2013-2020) of the mechanism. They highlight the unstable nature of the internal market structure. In particular, transaction costs alter the spatial flexibility of the EU ETS, while technological progress destabilizes the emission cap. These observations lead us to question the interest of a carbon price floor to remedy these instabilities. A fourth chapter therefore conducts an ex-ante analysis of the ETS electricity sector in the presence of three price support mechanisms. Our results suggest that the ability of the RMS to rapidly reduce the number of permits in circulation does not justify such a mechanism in the short term.

We investigate how institutions can shape differently the expression for efficiency and equity. We run four variants of the triple dictator game and the trust game in a within-subject design that enables to plot individual patterns. A veil of ignorance, a positional fee and information about others' behaviors are successively introduced to the two standard games. Alongside those treatments, we also control for individual preferences towards risk and other regarding preferences. Results show that while individuals demonstrate consistency in their preferences, the prospect of transfers in the trust game and the veil of ignorance increases efficiency and equity. Second, the option to choose their position as investor at some cost attracts the less cooperative players: they pay to be investor and keep more for themselves. Third, subjects who modify their investment decision after learning the average investment in their group tend to move closer to the average.

We examine policy instruments that aim to decarbonize electricity production by replacing fossil fuel energy with intermittent renewable sources, namely, wind and solar power. We consider a model of investment, production, and storage with two sources of energy: one is clean but intermittent (wind or solar), whereas the other one is reliable but polluting (thermal power). We first determine the first-best energy mix depending on the social cost of polluting emissions. We then show that, to implement the socially efficient energy mix without a carbon tax, feed-in tariffs and renewable portfolio standards must be complemented with a price cap and volume-limited capacity payments.

We analyze the interplay between policies aimed to control transboundary and local pollutants such as greenhouse gases and particulate matter. The two types of pollution interact in the abatement cost function of the polluting firms through economies or diseconomies of scope. They are regulated by distinct entities, potentially with different instruments that are designed according to some specific agenda. We show that the choice of regulatory instrument and the timing of the regulations matter for efficiency. Emissions of the local pollutant are distorted if the regulators anticipate that transboundary pollution will later be regulated through emission caps. The regulation is too stringent with diseconomies of scope, and not enough with economies of scope. In contrast, we obtain efficiency if the transboundary pollutant is regulated by emission taxes or tradable emission permits provided that the revenue from taxing emissions are redistributed to the countries in a lump-sum way and that the initial allocation of tradable emission permits is not linked to abatement costs.

Assessing the fairness of a public policy is not self-evident, as the criteria associated with the idea of fairness are diverse, imprecise and potentially contradictory. In this thesis, a two-stage approach is developed and discussed, which aims to identify equitable public policy options that are likely to be the subject of consensus after deliberation among those concerned. First, it is proposed to clarify the principles invoked and their articulation in a formalized decision-making context. Such an approach emphasizes the necessary trade-offs between these principles and makes it possible to identify possibilities for reconciling them, sometimes in a new way. Next, it is proposed to evaluate the fairness of the options identified on the basis of the judgments and values of the people concerned, as they can be observed through survey work or laboratory experiments. This approach is then implemented in a particular decision-making context where equity is a strong expectation: the location of socially desirable but locally undesirable public facilities. In the fourth chapter, I study the properties of different decision rules in a simple setting where a single indivisible project must be allocated among several agents with varying costs and compensation requirements. In the fifth chapter, I present the results of a laboratory experiment that focuses on the judgments of subjects placed in a situation similar to the one studied in the previous chapter. Finally, a last chapter is devoted to the study of some implications of a generalization of the initial framework to a set of situations that allows for the existence of externalities.

What is Corporate Social Responsibility (CSR) and can it be demand-driven? Is providing a public good profitable for companies or should these goods be provided exclusively by the state? Are green products excessively expensive and should they be taxed? Once the tax is imposed, who will benefit and who will actually pay the tax? How do outcomes depend on the complementarity or substitutability between the CSR investment in question and the public good provided by the state? Chapter 1 of this dissertation answers these questions and creates a conceptual framework for further analysis, in subsequent chapters, of CSR as a desirable practice by which firms provide a public good alongside the private good they produce. One of the issues that emerges from the analysis is the need to identify and explore a new form of dichotomy that is the trade-off between the provision of the public good by the market through CSR and its provision through the state. This issue is of great interest in the case of developing countries, but also in developed countries, where firms have important political connections. Chapter 2 shows that politically connected firms - or, in the extreme case, businessmen-politicians - are able to influence the government to reduce the level of public good it provides in order to maximize the reputational return on their CSR investment. The mechanism is as follows. An insufficient level of public good provided by the state offers significant political gains for firms that contribute to that good through their CSR activities to correct the state's failure. Consumers are then suspicious of the true motivations of firms behind these activities, they could result from their beneficence but also from their political greed. However, since all companies, including the most benevolent and opportunistic, participate, the fact that business and politics interfere does not damage the reputation of CSR participants since these political gains are so great that everyone is involved. Corruption becomes socially acceptable in the sense that it is not sanctioned in terms of reputation. Chapter 3 provides a strategic explanation for the phenomenon of corruption becoming epidemic in an economy. It explains why corruption, in the form of bribe-taking, can spread among different government agencies simply because of the interdependence of their efforts.

No summary available.

No summary available.

We consider the decentralized provision of a global public good with local externalities in a spatially explicit model. Communities decide on the location of a facility that benefits everyone but exhibits costs to the host and its neighbors. They share the costs through transfers. We examine cooperative games associated with this so-called Not In My Back-Yard problem. We derive and discuss conditions for core solutions to exist. These conditions are driven by the temptation to exclude groups of neighbors at any potential location. We illustrate the results in different spatial settings. These results clarify how property rights can affect cooperation and shed further light on a limitation of the Coase theorem.

A production process involves a principal and two privately informed agents. Production requires coordinated decision making. It might be carried in a centralized organization or through delegated contracting in a hierarchical structure. We compare the performance of different organizational structures when renegotiation of initial contracts is possible. We show that delegated contracting always dominates centralization if the downstream contract between the agents is observable. Contracting (resp. control) should be delegated to the agent with the least (resp. most) important information. If downstream contracts are not observable, we obtain a tradeoff between centralization and delegation.

No summary available.

When GM (genetically modified) and non-GM crops coexist, not all of the latter can be sold as GM-free crops as some of them will likely be contaminated by GM crops. The choice of producing non-GM crops will consequently depend on the surrounding crops. We therefore analyze the spatial distribution of GM and non-GM crops. When producers follow individual strategies, many spatial configurations arise in equilibrium, some of which are more efficient than others. We examine how coordination among producers impacts the spatial distribution of crop varieties, and show that coordination among only a small number of producers can greatly improve efficiency. In particular, a non-GM producer neighboring two GM producers needs to coordinate with only one of them to eliminate any spatial inefficiency from variety choices.

We consider the problem of regulating an economy with environmental pollution. We examine the distributional impact of the polluter-pays (PP) principle which requires that any agent compensates all other agents for the damages caused by his or her (pollution) emissions. With constant marginal damages we show that regulation via the PP principle leads to the unique welfare distribution that induces non-negative individual welfare change and renders each agent responsible for his or her pollution impact. We extend both the PP principle and this result to increasing marginal damages due to pollution. We also compare the PP principle with the Vickrey–Clark–Groves scheme.

Some twenty years ago, Harvard Business School economist and strategy professor Michael Porter challenged conventional wisdom about the impact of environmental regulation on business by declaring that well-designed regulation could actually enhance competitiveness. The traditional view of environmental regulation held by virtually all economists until that time was that requiring firms to reduce an externality like pollution necessarily restricted their options and thus by definition reduced their profits. After all, if profitable opportunities existed to reduce pollution, profit-maximizing firms would already be taking advantage of them. Over the past twenty years, much has been written about what has since become known simply as the Porter Hypothesis. Yet even today, we continue to find conflicting evidence concerning the Porter Hypothesis, alternative theories that might explain it, and oftentimes a misunderstanding of what the Porter Hypothesis does and does not say. This article examines the key theoretical foundations and empirical evidence concerning the Porter Hypothesis, discusses its implications for the design of environmental regulations, and outlines directions for future research on the relationship between environmental regulation, innovation, and competitiveness.

In a laboratory experiment we test three regulations imposed on a common-pool resource game with heterogeneous users: an access fee and subsidy scheme, transferable quotas and non-transferable quotas. We calibrate the game so that all regulations improve users’ profits compared to free-access extraction. We compare the regulations according to five criteria: resource preservation, individual profits, profit difference, Pareto-improvement from free-access and sorting of the most efficient users. One of the main findings is that, even though it performs better in sorting out the most efficient subjects, the fee and subsidy scheme is not more profitable than tradable quotas.

We examine the choice of policy instruments (price, quantity or a mix of the two) when two pollutants are regulated and firms’ abatement costs are private information. Whether abatement efforts are complements or substitutes is key determining the choice of policies. When pollutants are complements, a mixed policy instrument with a tax on one pollutant and a quota on another is sometimes preferable even if the pollutants are identical in terms of benefits and costs of abatement. Yet, if they are substitutes, themixed policy is dominated by taxes or quotas.

By signing a water sharing agreement (WSA), countries agree to release an amount of river water in exchange for a negotiated compensation. We examine the vulnerability of such agreements to reduced water flows. Among all WSAs that are acceptable to riparian countries, we find out the one which is self-enforced under the most severe drought scenarios. The so-called upstream incremental WSA assigns to each country its marginal contribution to its followers in the river. Its mirror image, the downstream incremental WSA, is not sustainable to reduced flow at the source. Self-enforcement problems can be solved by setting water releases and compensations contingent to water flow. We apply our analysis to the Aral Sea Basin. We compute the upstream incremental compensations for the Bishkek agreement and asses its vulnerability with historical flows.

The thesis studies the choice of acceptable regulatory instruments ("pareto improvers") in order to reduce the exploitation of a common resource exploited by heterogeneous individuals in open access. Using a broad methodological spectrum, we experimentally test the hypotheses retained in the theoretical model, and evaluate the effectiveness of different public policies in a specific case. The introductory chapter formulates our analytical framework and the problematic of the thesis. Chapter 2 examines the short-run impact of three regulations, a tax/subsidy, a transferable and a non-transferable quota, under the following policy feasibility constraint: no agent should lose relative to the extraction he or she was getting under open access. We find that market instruments, i.e., the tax/subsidy system and transferable quotas, achieve a greater and more efficient reduction in the level of exploitation of the common pool resource than non-transferable quotas. However, both market instruments increase inequality, while non-transferable quotas decrease it. In Chapter 3 we test in a laboratory experiment these three regulators imposed by a regulator in a common pool game. The theory thus predicts that all regulations reduce open access exploitation without reducing individual welfare. We find that the exploitation reduction objective is achieved for each instrument, albeit with greater variance for the tax system. Both market instruments select the most efficient agents on the common resource, with a better performance for tax/subsidy, but this instrument leads to a higher degree of inequality. None of the three regulations satisfies the acceptability constraint. Note that the non-transferable quota is the instrument that least satisfies this condition. Chapter 4 reviews the state of fisheries management in Lake Annecy, where two groups of fishermen share the resource (amateurs and professionals). The development of recreational fishing has often generated conflicts and today, together with commercial fishing, exerts a very strong pressure on the resource. Despite well-defined regulations for each party, the tensions between the various actors make their enforcement difficult. The economic analysis reveals three important elements: (i) the rearing rules are unfavorable to professional fishermen. (ii) the atypical fish market in Annecy. (iii) the problem of "monitoring" the regulations on the lake. We are studying the implementation of new regulation instruments to respond to the conflicts between the two groups of fishermen.