The Welfare Sensitivity of Agri-Environmental Instruments

Abstract

Most economic studies of pollution control analyze policies that are optimal for a given set of underlying parameters. Less understood is how such policies perform when the underlying parameters change and policies are not adjusted in response, or what the benefits of adjustment are. We construct several measures of welfare sensitivity and use them to analyze the welfare impacts arising in a simulation of second-best, agri-environmental policies.

Keywords

• emissions standards
• emissions taxes
• environmental policy
• input standards
• input taxes
• nonpoint pollution
• policy adjustment