In this paper, we analyze whether it is socially desirable that fines for exceeding pollution standards depend not only on the degree of non-compliance but also on technology investment efforts by the polluting firms. For that purpose, we consider a partial equilibrium framework where a...

We investigate the features of optimal environmental policies composed of pollution standards and costly inspection processes, where fines for exceeding the standards depend both on the degree of transgression and the environmental technology that the firm uses to reduce the social impact of its...