The Choice Of Environmental Policy Instruments Under Incomplete Information

Among the problems that human have faced,few ones like environmental problems have so great impact on consumer behaviour,enterprise strategy and public policy(Callen,2005).With the increasing development of economy in China,the environmental situation is serious.The government has been finding measures to reduce environmental risk.It is urgent to choose the correct environmental policy instruments.According to the way of resource allocation,the environmental policy instruments can be divided into two categories which are command and control approach and market approach.Specifically,There are six kinds of typical policy instruments,which are technology-based standard,performance-based standard,pollution charge,subsidy,deposit-refund system,pollution permit trading system.In this paper,we research the choice of environmental policy instruments based on the goals of environmental governance from the following three aspects.Firstly,this paper analyzes the characteristics,advantages,disadvantages,applicable scope and so on of six kinds of environmental policy instruments using the method of comparative analysis.In conclusion,any environmental policy instrument has its advantages,disadvantages and different applicability.In environmental policy making,we will not choose one certain policy instrument simply,but combine with several policy instruments after considering actual situation,multiple objective,and characteristics of various policy instruments.Secondly,this paper researches the cost-saving effects of the pollution permit trading system theoretically from the micro perspective using the method of mathematical derivation and the optimal planning.Firstly,we build the mathematical models to derive regulators' enforcement strategies and enforcement costs that minimize aggregate program costs under the specific emission standard system and pollution permit trading system.Then,by comparing the enforcement cost and aggregate social cost of abatement,we find that under incomplete information,the aggregate social cost of abatement based on pollution permit trading system cannot be higher than specific emission standard system.That is to say,under incomplete information,the pollution permit trading system compared with specific emission standard system have cost-saving effect.Thirdly,this paper researches the cost-saving effects of the pollution permit trading system empirically from the macro perspective using the method of Difference-in-Difference.We select 1998-2014 provincial panel data of 30 provinces in our country.Then we build Difference-in-Difference model containing bidirectional fixed effects and apply the fixed effects estimating method to estimate the model.We find that the implementation of the pollution permit trading system do not significantly reduce abatement cost,enforcement cost or aggregate social cost of abatement.This shows that the pollution permit trading system in our country haven't reflect the cost-saving effects in practice.This is because that the implementation of the pollution permit trading system depends on effective market and related high environmental technology.Therefore,the inefficient operation of market of emissions trading and the overall weak environmental regulation result in the bad implementation of pollution permit trading system.