Using experiments in which participants play the role of polluting firms, we study compliance behavior with emissions limits under two types of fines and two different regulatory instruments. We find that the market price of pollution permits and the probability of violating permits holdings are...

We propose enforcement strategies for emissions trading programs with bankable emissions permits that guarantee complete compliance with minimal enforcement costs. Our strategies emphasize imperfect monitoring supported by a high unit penalty for reporting violations, and tying this penalty...

We study individual compliance behavior with respect to a legal norm in an experimental setting under two different regulatory instruments: emission standards and tradable pollution permits. Compliance to the same set of standards and expected permit holdings was induced with different...