Information asymmetry in voluntary environmental agreements (VEAs): theory and evidence from UK climate change agreements (CCAs)

Adetutu, MO ORCID: https://orcid.org/0000-0002-0402-7847 and Stathopoulou, E ORCID: https://orcid.org/0000-0001-6543-3534, 2021. Information asymmetry in voluntary environmental agreements (VEAs): theory and evidence from UK climate change agreements (CCAs). Oxford Economic Papers, 73 (2), pp. 644-670. ISSN 0030-7653

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Abstract

Voluntary environmental agreements (VEAs) are often plagued by adverse selection problems, because the regulator has imperfect information about firm-specific production technologies and abatement costs. We explore this issue using the UK climate change agreement (CCA) as a case study. First, we present a theoretical emulation of the program. Second, we resolve the regulator’s asymmetric information problem by estimating unobserved energy efficiency using production theory. Third, we use microdata from three confidential manufacturing surveys to empirically test how limited information impacts resource allocation within the scheme. In line with the problem of limited information about firm production technologies, we find that firms with lower levels of energy efficiency receive higher CCA tax discounts. This finding holds over a range of robustness tests.

Item Type:	Journal article
Alternative Title:	Information asymmetry in voluntary environmental agreements
Publication Title:	Oxford Economic Papers
Creators:	Adetutu, M.O. and Stathopoulou, E.
Publisher:	Oxford University Press
Date:	April 2021
Volume:	73
Number:	2
ISSN:	0030-7653
Identifiers:	Number Type 10.1093/oep/gpaa018 DOI 1325404 Other
Divisions:	Schools > Nottingham Business School
Record created by:	Linda Sullivan
Date Added:	14 May 2020 13:38
Last Modified:	13 Jun 2022 03:00
URI:	https://irep.ntu.ac.uk/id/eprint/39845

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