RT Journal Article SR Electronic T1 Discretionary Exemptions from Environmental Regulation JF Land Economics JO Land Econ FD University of Wisconsin Press SP 203 OP 221 DO 10.3368/le.052520-0071R1 VO 99 IS 2 A1 Dietrich Earnhart A1 Sarah Jacobson A1 Yusuke Kuwayama A1 Richard T. Woodward YR 2023 UL http://le.uwpress.org/content/99/2/203.abstract AB Many environmental regulations impose limits on harmful activities but include discretionary “safety valve” provisions allowing the regulator to grant exemptions that provide relief to regulated parties. We construct a theoretical model and explore cases in which this discretion serves good or ill. We show that when a regulation is otherwise inflexible, exemptions can improve social welfare, and perhaps reduce pollution, by distributing abatement more cost-effectively across polluters. However, these beneficial predictions rely on an unconstrained, fully informed, and benevolent regulator. In other cases, exemptions may not offer such gains; further, the discretionary nature of exemptions allows them to be abused.