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Structural Uncertainty and Pollution Control: Optimal Stringency with Unknown Pollution Sources

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Listed:
  • Richard T. Carson

    (UC San Diego)

  • Jacob LaRiviere

    (University of Tennessee)

Abstract

We relax the common assumption that regulators know the structural relationship between emissions and ambient air quality with certainty. We find that uncertainty over this relationship can manifest as a unique form of multiplicative uncertainty in the marginal damages from emissions. We show how the optimal stringency of environmental regulation depends on this structural uncertainty. We also show how new information, like the discovery of previously unknown emission sources, can counterintuitively lead to increases in both optimal emissions and ambient pollution levels.

Suggested Citation

  • Richard T. Carson & Jacob LaRiviere, 2018. "Structural Uncertainty and Pollution Control: Optimal Stringency with Unknown Pollution Sources," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 71(2), pages 337-355, October.
    • Handle: RePEc:kap:enreec:v:71:y:2018:i:2:d:10.1007_s10640-017-0156-1
    DOI: 10.1007/s10640-017-0156-1
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    References listed on IDEAS

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    Cited by:

    1. Ambec, Stefan & De Donder, Philippe, 2022. "Environmental policy with green consumerism," Journal of Environmental Economics and Management, Elsevier, vol. 111(C).
    2. Dale Whittington & Richard T. Carson & Thomas Sterner, 2023. "Policy Note: Benefit Cost Analysis of Water Investments in the Anthropocene," Water Economics and Policy (WEP), World Scientific Publishing Co. Pte. Ltd., vol. 9(03), pages 1-23, July.
    3. Jacob LaRiviere & David Kling & James N Sanchirico & Charles Sims & Michael Springborn, 2018. "The Treatment of Uncertainty and Learning in the Economics of Natural Resource and Environmental Management," Review of Environmental Economics and Policy, Association of Environmental and Resource Economists, vol. 12(1), pages 92-112.
    4. Jorge A. Bonilla & Claudia Aravena & Ricardo Morales-Betancourt, 2023. "Assessing Multiple Inequalities and Air Pollution Abatement Policies," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 84(3), pages 695-727, March.
    5. Jorge A. Bonilla & Claudia Aravena & Ricardo Morales-Betancourt, 2021. "Assessing Multiple Inequalities and Air Pollution Abatement Policies," Documentos CEDE 19465, Universidad de los Andes, Facultad de Economía, CEDE.

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    More about this item

    Keywords

    Information; Regulation; Externalities;
    All these keywords.

    JEL classification:

    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • C11 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Bayesian Analysis: General
    • Q53 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Air Pollution; Water Pollution; Noise; Hazardous Waste; Solid Waste; Recycling

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