Pollution Monitoring: Optimal Design of Inspection—An Economic Analysis of the Use of Satellite Information to Deter Oil Pollution

Abstract

A cost–benefit analysis defines the optimal monitoring technique to fight against tankers' illegal oil dumping in the sea: aerial inspection of maritime areas is compared with inspection using imperfect but costly satellite information to design aerial inspection, when polluters are fined if observed by a plane. We provide theoretical modeling and show that, at the equilibrium of the game between polluters and the monitoring agency, satellite information can decrease pollution, reduce monitoring costs, or both, depending on the social cost of pollution. We prove that the condition under which combining satellite and aerial observation dissuades more polluters than only relying on aerial monitoring does not depend on satellite information accuracy. A numerical example applies the model to the choice of the optimal monitoring technique over the Channel and the Mediterranean Sea.