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Regulation of Stock Externalities with Correlated Costs

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  • Karp, Larry S.
  • Zhang, Jiangfeng

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 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.

Suggested Citation

  • Karp, Larry S. & Zhang, Jiangfeng, 2003. "Regulation of Stock Externalities with Correlated Costs," CUDARE Working Papers 25077, University of California, Berkeley, Department of Agricultural and Resource Economics.
    • Handle: RePEc:ags:ucbecw:25077
    DOI: 10.22004/ag.econ.25077
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    References listed on IDEAS

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    1. Kolstad, Charles D., 1996. "Learning and Stock Effects in Environmental Regulation: The Case of Greenhouse Gas Emissions," Journal of Environmental Economics and Management, Elsevier, vol. 31(1), pages 1-18, July.
    2. Watson, William D. & Ridker, Ronald G., 1984. "Losses from effluent taxes and quotas under uncertainty," Journal of Environmental Economics and Management, Elsevier, vol. 11(4), pages 310-326, December.
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    4. Hoel, Michael & Karp, Larry, 2002. "Taxes versus quotas for a stock pollutant," Resource and Energy Economics, Elsevier, vol. 24(4), pages 367-384, November.
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    7. 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).
    8. Roberts, Marc J. & Spence, Michael, 1976. "Effluent charges and licenses under uncertainty," Journal of Public Economics, Elsevier, vol. 5(3-4), pages 193-208.
    9. Hoel, Michael & Karp, Larry, 2001. "Taxes and quotas for a stock pollutant with multiplicative uncertainty," Journal of Public Economics, Elsevier, vol. 82(1), pages 91-114, October.
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    Keywords

    Environmental Economics and Policy;

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