As the environmental policy is getting stringent, the regulated firms have more pressures to comply with the policy. Even the regulating agency itself faced with more cost to monitor and manage the firms to achieve the environmental target. In this sense, there needs to be considered the cost occurring to the both side, regulating agency and regulated firms. In this research, there needs more flexible policy instruments for the both regulated firms and regulating agency.
Currently the transaction cost concept in environmental policy isn’t much reflected on literatures. In other words, there are not common methodology and framework for analyzing the transaction cost in implementing environmental policy. Even more there is lack of internationally comparable data standards that can access environmental cost. Therefore, this paper categorizes the implementing cost, which can be divided into direct and indirect cost. Furthermore the information cost is divided into transaction cost and information cost. By using simple survey which targets Korean Industries, this work identifies the existing transaction cost and its role in implementing command and control environmental policy, mainly air pollution abatement policy. In conclusion, there is pretty high direct cost to implement current command and control policy but the information cost is not significant. For further study, there needs to evaluate the costs that exist in other policy instruments such as economic instruments or voluntary agreement.
