Template-Type: ReDIF-Paper 1.0
Series: Tinbergen Institute Discussion Papers
Creation-Date: 2024-05-23
Number: 24-035/VIII
Author-Name: Jens Gudmundsson
Author-Workplace-Name: University of Copenhagen
Author-Name: Jens Leth Hougaard
Author-Workplace-Name: University of Copenhagen
Author-Name: Erik Ansink
Author-Workplace-Name: Vrije Universiteit Amsterdam
Title: Towards fully decentralized environmental regulation
Abstract: We take a decentralized approach to regulating environmental pollution in set- tings where each agent’s pollution possibly affects all others. There is no central agency to enforce pollution abatement or coordinate monetary transfers. Moreover, agents possess private information, which precludes deducing efficient abatement in general. We propose to implement transfer schemes through smart contracts to allow beneficiaries to compensate for abatement. We characterize all schemes that induce efficient abatement in unique dominant-strategy equilibrium. Moreover, appealing to classical fairness tenets, we pin down the “beneficiaries-compensates principle”. Supporting this principle through smart contracts provides a promising step towards decentralized coordination on environmental issues.
Classification-JEL: C72, D62, Q52, H23
Keywords: Pollution, Decentralization, Smart contracts, Beneficiaries-compensates principle
File-URL: https://papers.tinbergen.nl/24035.pdf
File-Format: application/pdf
File-Size: 473.278 bytes
Handle: RePEc:tin:wpaper:20240035