Regulation of Stock Externalities with Correlated Abatement Costs
Abstract
We study a dynamic regulation model where firms’ actions contribute to a stock externality. The regulator and firms have asymmetric information about serially correlated abatement costs. With price-based policies such as taxes, or if firms trade quotas efficiently, the regulator learns about the evolution of both the stock and costs. This ability to learn about costs is important in determining the ranking of taxes and quotas, and in determining the value of a feedback rather than an open-loop policy. For a range of parameter values commonly used in global warming studies, taxes dominate quotas, regardless of whether the regulator uses an open-loop or a feedback policy, and regardless of the extent of cost correlation. Copyright Springer 2005Download Info
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Bibliographic Info
Article provided by European Association of Environmental and Resource Economists in its journal Environmental & Resource Economics.
Volume (Year): 32 (2005)
Issue (Month): 2 (October)
Pages: 273-300
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Web page: http://www.springerlink.com/link.asp?id=100263
Related research
Keywords: asymmetric information; choice of instruments; correlated costs; learning; pollution control; C61; D8; H21; Q28;Find related papers by JEL classification:
- C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
- D8 - Microeconomics - - Information, Knowledge, and Uncertainty
- H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
- Q28 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Government Policy
References
References listed on IDEASPlease report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Karp, Larry & Zhang, Jiangfeng, 2006. "Regulation with anticipated learning about environmental damages," Journal of Environmental Economics and Management, Elsevier, vol. 51(3), pages 259-279, May.
- Brozovic, Nicholas & Sunding, David L. & Zilberman, David, 2004. "Prices versus Quantities Reconsidered," 2004 Annual meeting, August 1-4, Denver, CO 20257, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
Citations
RePEc Biblio mentions
As found on the RePEc Biblio, the curated bibliography for Economics: Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.Cited by:
- Gilbert Metcalf & David Weisbach, 2008.
"The Design of a Carbon Tax,"
Discussion Papers Series, Department of Economics, Tufts University
0727, Department of Economics, Tufts University.
- Gilbert Metcalf & David Weisbach, 2008. "The Design of a Carbon Tax," Discussion Papers Series, Department of Economics, Tufts University 0728, Department of Economics, Tufts University.
- Metcalf, Gilbert & Weisbach, David, 2009. "The Design of a Carbon Tax," Working paper 142, Regulation2point0.
- Gilbert E. Metcalf & Sergey Paltsev & John Reilly & Henry Jacoby & Jennifer F. Holak, 2008. "Analysis of U.S. Greenhouse Gas Tax Proposals," NBER Working Papers 13980, National Bureau of Economic Research, Inc.
- Joseph E. Aldy & Alan J. Krupnick & Richard G. Newell & Ian W.H. Parry & William A. Pizer, 2009.
"Designing Climate Mitigation Policy,"
NBER Working Papers
15022, National Bureau of Economic Research, Inc.
- Joseph E. Aldy & Alan J. Krupnick & Richard G. Newell & Ian W. H. Parry & William A. Pizer, 2010. "Designing Climate Mitigation Policy," Journal of Economic Literature, American Economic Association, vol. 48(4), pages 903-34, December.
- Aldy, Joseph E. & Krupnick, Alan J. & Newell, Richard G. & Parry, Ian W.H. & Pizer, William A., 2009. "Designing Climate Mitigation Policy," Discussion Papers dp-08-16, Resources For the Future.
- Gilbert E. Metcalf, 2009.
"Designing a Carbon Tax to Reduce U.S. Greenhouse Gas Emissions,"
Review of Environmental Economics and Policy,
Association of Environmental and Resource Economists, vol. 3(1), pages 63-83, Winter.
- Gilbert E. Metcalf, 2008. "Designing A Carbon Tax to Reduce U.S. Greenhouse Gas Emissions," NBER Working Papers 14375, National Bureau of Economic Research, Inc.
- Karp, Larry & Zhang, Jiangfeng, 2006. "Regulation with anticipated learning about environmental damages," Journal of Environmental Economics and Management, Elsevier, vol. 51(3), pages 259-279, May.
- Gilbert E. Metcalf, 2009. "Market-Based Policy Options to Control U.S. Greenhouse Gas Emissions," Journal of Economic Perspectives, American Economic Association, vol. 23(2), pages 5-27, Spring.
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