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Emissions Taxes and Abatement Regulation Under Uncertainty

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  • Vidar Christiansen
  • Stephen Smith

Abstract

We consider environmental regulation in a context where firms invest in abatement technology under conditions of uncertainty about subsequent abatement cost, but can subsequently adjust output in the light of true marginal abatement cost. Where an emissions tax is the only available instrument, policy faces a trade-off between the incentive to invest in abatement technology and efficiency in subsequent output decisions. More efficient outcomes can be achieved by supplementing the emissions tax with direct regulation of abatement technology, or by combining the tax with an abatement technology investment subsidy. We compare the properties of these alternative instrument combinations. Copyright The Author(s) 2015

Suggested Citation

  • Vidar Christiansen & Stephen Smith, 2015. "Emissions Taxes and Abatement Regulation Under Uncertainty," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 60(1), pages 17-35, January.
    • Handle: RePEc:kap:enreec:v:60:y:2015:i:1:p:17-35
    DOI: 10.1007/s10640-013-9755-7
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    1. Quirion, Philippe, 2005. "Does uncertainty justify intensity emission caps?," Resource and Energy Economics, Elsevier, vol. 27(4), pages 343-353, November.
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    Cited by:

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    2. Li, He & Lu, Juan, 2021. "Can stable environmental protection officials’ tenure reduce illegal emissions?," Socio-Economic Planning Sciences, Elsevier, vol. 78(C).
    3. Weiming Lin & Jianling Chen & Jianbang Gan & Yongwu Dai, 2022. "Do Firms That Are Disadvantaged by Unilateral Climate Policy Receive Compensation? Evidence from China’s Energy-Saving Quota Policy," Sustainability, MDPI, vol. 14(22), pages 1-20, November.
    4. Antimiani, Alessandro & Costantini, Valeria & Kuik, Onno & Paglialunga, Elena, 2016. "Mitigation of adverse effects on competitiveness and leakage of unilateral EU climate policy: An assessment of policy instruments," Ecological Economics, Elsevier, vol. 128(C), pages 246-259.
    5. Tchorzewska, K.B. & Garcia-Quevedo, J. & Martinez-Ros, E., 2022. "The heterogeneous effects of environmental taxation on green technologies," Research Policy, Elsevier, vol. 51(7).
    6. Eirik S. Amundsen & Lars Gårn Hansen & Hans Jørgen Whitta-Jacobsen, 2022. "Regulation of Location-Specific Externalities from Small-Scale Polluters," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 82(3), pages 507-528, July.
    7. Jihad C. Elnaboulsi & Wassim Daher & Yiğit Sağlam, 2023. "Environmental taxation, information precision, and information sharing," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 25(2), pages 301-341, April.
    8. Jeddi, Samir & Lencz, Dominic & Wildgrube, Theresa, 2021. "Complementing carbon prices with Carbon Contracts for Difference in the presence of risk - When is it beneficial and when not?," EWI Working Papers 2021-9, Energiewirtschaftliches Institut an der Universitaet zu Koeln (EWI), revised 16 Aug 2022.

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    More about this item

    Keywords

    Externalities; Pigouvian taxes; Regulation; Subsidies; H23;
    All these keywords.

    JEL classification:

    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies

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