Theoretical, experimental, valuation and empirical issues in the design of environmental and natural resource policies

While most economists tout the benefits of using incentive-based policies (like emission taxes, emissions markets, and individual transferable quotas), many conceptual details concerning implementation and management of these policies have not been addressed. Recent research suggests that commonly-held notions of efficient incentive-based policies need to be modified to account for the costs of enforcing these policies. Moreover, most theoretical models of incentive-based policies contain assumptions that are not even approximately true in more difficult applications of incentive policies than their current applications. Two examples are: the ability of regulators to monitor emissions accurately to support emissions taxes or cap-and-trade programs; and that enforcement authorities cannot be corrupted. These issues are particularly important for the design of global climate change policies, because there is much variation in the effectiveness of environmental and natural resource enforcement institutions around the world. Designing efficient controls for carbon emissions must account for this variation. We intend to use experimental economics, and stated preference surveys to address these issues as well as evaluating alternative regulatory approaches and the management of common property.