In this paper we examine cross-subsidisation among combined heat and power producers in Denmark. Information on stand-alone costs for heat generation allows us to empirically compare the Faulhaber tests, tests with an upper bound on stand-alone costs (the Palmer tests) and the fully distributed...

It is widely accepted that decentralized control of local pollution is inefficient if the central and the local authorities are imperfectly informed. This paper shows how the central authority can introduce a flexible grant-in-aid system that induces the local authority to use a weighted...