Prices versus quantities in a vintage capital model
AbstractThe heterogeneity of the available physical capital with respect to productivity and emission intensity is an important factor for policy design, especially in the presence of emission restrictions. In a vintage capital model, reducing pollution requires to change the capital structure through investment in cleaner machines and to scrap the more polluting ones. In such a setting we show that emission tax and auctioned emission permits may yield contrasting outcomes. We also show that some failures in the permits market may undermine its efficiency and that imposing the emission cap over longer periods plays a regularizing role in the market.
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Bibliographic InfoPaper provided by Université catholique de Louvain, Center for Operations Research and Econometrics (CORE) in its series CORE Discussion Papers with number 2009015.
Date of creation: 01 Mar 2009
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This paper has been announced in the following NEP Reports:
- NEP-ALL-2010-03-28 (All new papers)
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