Second-Best Environmental Policy and Nonconvexities : The Asymmetry Between Taxes and Tradeable Permits
AbstractIn second-best environmental policies, nonconvexities arise because of decreasing marginal pollution abatement costs. In this case, we chow that, unlike tradeable permits, taxes may introduce incorrect incentives. Moreover, even when taxes lead to efficient solutions, the tax rate should not be based on marginal pollution abatement cost, but to average costs.
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Bibliographic InfoPaper provided by Institut d'Economie et Econométrie, Université de Genève in its series Research Papers by the Institute of Economics and Econometrics, Geneva School of Economics and Management, University of Geneva with number 96.14.
Length: 8 pages
Date of creation: 1996
Date of revision:
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POLLUTION CONTROL; POLLUTION LEVEL; REGULATION;
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