This paper analyzes the impact of accounting for asset retirement obligations on managerial performance evaluation and on environmental costs caused by asset acquisition. The paper develops a two-period agency setting in which a manager must be given incentives to undertake investments that lead to environmental remediation costs. Focusing the short-term linear compensation contracts on the firm’s performance measures (i.e. accounting income), the paper demonstrates that the manager’s investment decision may be distorted by recognition and measurement of asset retirement obligations in the income measurement process, resulting in an increase in environmental costs.

I model a waste disposal market under uncertainty of pollution damage by an assignment game between disposal firms and producers. My purpose is to compare social welfare with regard to responsibility under various legal systems that are supposed to prevent adverse selection or moral hazard. Among legal systems such as the negligence rule, strict liability, extended producer responsibility, and penalty systems, I observe certain advantages of the extended responsibility and the penalty system. I also obtain a condition under which the strict liability or the negligence rule yields higher social welfare than other systems.

This paper investigates seminal works on illegal emissions and the social costs of environmental policy that seeks to achieve a given aggregate emissions target. First, we re-examine the Sandmo (2002) model of incomplete compliance and demonstrate that the cost effectiveness of the ‘economic instrument’, which minimizes the aggregate abatement cost while achieving the targets, is not robust against noncompliance by the regulated firms. Next, we refine the propositions of Macho-Stadler and Pérez-Castrillo (2006) who study monitoring and enforcement of environmental taxation and argue that all firms evade the environmental taxes when an optimal audit program is implemented. Finally, we review Strunland (2007) who defines the social costs of emissions trading in the broadest sense and maintains that full compliance by all firms is desirable, and reconsider his proposition that the cost of a linear penalty schedule is lower than that of a strictly convex one.

Travel cost method is a revealed preference method used for valuing recreational benefits, specific environmental attributes, or their changes. Over the past half-century, the method has been one of the central themes in environmental valuation methodology. The purpose of this paper is to explore past achievements of and future challenges for the travel cost method, with a focus on progress in model development.