Over time, inspection agencies gather information about firms’ pollution levels and this information may allow agencies to differentiate their monitoring strategies in the future. If a firm is less successful than its peers in reducing emissions, it faces the risk of being targeted for...

Investment subsidies are widely used to induce adoption of new technologies that can lower the (marginal) cost of reducing emissions. To economize on these subsidies, governments would like to distinguish between firms that need to receive a subsidy to adopt a new technology, and firms that...