A Note on Emissions Taxes and Incomplete Information
AbstractIn contrast with what we perceive is the conventional wisdom about setting emissions taxes under uncertainty, we demonstrate that setting a uniform tax equal to expected marginal damage is not generally efficient under incomplete information about firmsâ abatement costs and damages from pollution. We show that efficient taxes will deviate from expected marginal damage if there is uncertainty about the slopes of the marginal abatement costs of regulated firms. Moreover, efficient emissions tax rates will vary across firms if a regulator can use observable firm-level characteristics to gain some information about how the firmsâ marginal abatement costs vary.
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Bibliographic InfoArticle provided by European Association of Environmental and Resource Economists in its journal Environmental and Resource Economics.
Volume (Year): 44 (2009)
Issue (Month): 1 (September)
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Web page: http://www.springerlink.com/link.asp?id=100263
Emissions taxes; Asymmetric information; Incomplete information; Uncertainty; L51; Q28;
Other versions of this item:
- Carlos A. Chavez & John K. Stranlund, 2008. "A Note on Emissions Taxes and Incomplete Information," Working Papers 2008-5, University of Massachusetts Amherst, Department of Resource Economics.
- L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
- Q28 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Government Policy
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