Shiftable externalities: A market solution

In this paper we propose a regulatory scheme for what has become known as 'shiftable' externalities ('Not In My Backyard' type garbage location problems where the externality is characterized by the absence of jointness in supply). The scheme facilitates the establishment of a market for the externality, and it is feasible for a wider class of regulation problems and more information efficient than the other regulatory schemes that have been proposed for this type of externality. Finally, we show that it is possible to decentralize the participation decision so as to take account of verification costs.