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 Département des Sciences Économiques, Université de Genève in its series Research Papers by the Department of Economics, 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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