Despite the complex environmental regulation system established during the last ten years environmental situation in Russia tends to be negative. The main reason of Russian environmental regulation inefficiency is enforcement and monitoring problems. Russian enterprises have little incentives to follow regulation. Environmental regulation has been disregarded during Soviet economy. Now when economical and political situation is unstable environmental concerns are still not on the top of government agenda. Regulating environmental agencies don t get enough resources from government for sufficient monitoring and inspections of polluters. Generally low fines for violation of environmental requirement make situation worse. Then task to find an efficient way that could enforce enterprises to comply with pollution is important.
A mechanism of enforcement pollution standards that could be appropriate in Russian circumstances when pollution monitoring is low and violation fines are restricted is presented in this paper.
The main analysis developed here is based on models of Harrington (1988) and Raymond (1999) that consider the state-dependent enforcement mechanism when violation fines are restricted. In this mechanism fines and inspection rates differ depending on the outcomes of last inspection. Such mechanism as proved gives enterprises extra incentives to comply with pollution regulation.
The model of Harrington (1998) and its asymmetric information consideration by Raymond (1999) is extended and conditions when state-dependent enforcement is preferable to static (state-independent) enforcement are derived in the paper. If in a region concentration of firms with high marginal compliance costs is higher than concentration of firms with low marginal compliance costs then state-dependent enforcement is preferable.
Applicability the state-dependent enforcement mechanism to pollution standards regulation in Russia is discussed.