Allowing companies limited privilege for self-reporting emissions reduces pollution and saves regulatory costs

In a study of manufacturing firms, researchers explored the effects of self-auditing and self-reporting emissions violations on emissions and the cost of regulation with various levels of regulatory considerations. Findings show that reduced penalties for firms that self-audit and report violations reduced pollution rates and inspections of participating firms. Policies that granted immunity generally raised pollution rates as well as inspection rates – and therefore the cost of regulation.