EMISSION STANDARDS AND STOCHASTIC WASTE LOAD

Empirical work regarding the impact of environmental regulations on fi rm behavior has been developed under the assumption that emissions of pollutants are deterministic. The implication is that the regulation i s effective only when the constraint is exactly satisfied. In real lif e, however, it is seldom the case that emission constraints are exactl y satisfied. The purpose of this paper is to find out whether regulati on schemes are ineffective, or whether the structure is an optimal rea ction to random fluctuations in emissions. The Swedish pulp and paper industry is used as an empirical illustration.