NO : WP-2023-09
AUTHOR : Preksha Jain and Rupayan Pal
TITLE : Corruption-Proof Minimum Regulation for ‘Zero Emission’: Status Incentives – Bane or Boon?
This paper explores the possibility of designing environmental regulation that ensures ‘zero emission’,
by promoting non-polluting ‘green’ technology adoption by firms, without creating new rooms for
corruption. It demonstrates that it is feasible to implement the ‘target equilibrium’, in which there is ‘no
emission and no corruption’, through environmental regulation alone. It also characterizes the ‘target
equilibrium’ implementing ‘minimum environmental regulation’, which corresponds to the least
possible subsidy expenditure and the lowest possible tax burden on firms, in alternative scenarios. More
interestingly, it shows that, in the presence of corruption possibilities, introduction of reputation
enhancing non-monetary incentives for ‘green’ technology adoption makes it harder to implement the
‘target equilibrium’. It underscores that usefulness of status incentives to nudge firms’ behaviour for
environmental protection is rather limited. These are robust results.
Keywords: Zero Emission; Corruption; Minimum Environmental Regulation; Non-monetary
Status Incentive; Brown Tax; Green Technology Subsidy
JEL Code: Q58; H23; Q52; D73