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Prices vs Quantities with Multiple Pollutants

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  • Ambec, Stefan

    ()
    (Toulouse School of Economics (INRA-LERNA) and University of Gothenburg)

  • Coria, Jessica

    ()
    (Department of Economics, School of Business, Economics and Law, Göteborg University)

Abstract

We examine the choice of policy instrument price, quantity, or a mix of the two when two pollutants are regulated and firms’ abatement costs are private information. A key parameter that affects this choice is the technological externality between the abatement efforts involved, i.e., whether they are substitutes or complements. If they are complements, a mix policy instrument with a tax on one pollutant and a quota on the other is sometime preferable, even if the pollutants are identical in terms of benefits and costs of abatement. Yet, if they are substitutes, the mix policy is dominated by taxes or quotas.

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Bibliographic Info

Paper provided by University of Gothenburg, Department of Economics in its series Working Papers in Economics with number 517.

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Length: 30 pages
Date of creation: 27 Sep 2011
Date of revision:
Handle: RePEc:hhs:gunwpe:0517

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Postal: Department of Economics, School of Business, Economics and Law, University of Gothenburg, Box 640, SE 405 30 GÖTEBORG, Sweden
Phone: 031-773 10 00
Web page: http://www.handels.gu.se/econ/
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Keywords: pollution; environmental regulation; policy mixes; tax; emission standard; asymmetric information;

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References

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Cited by:
  1. Bonilla, Jorge & Coria, Jessica & Sterner, Thomas, 2012. "Synergies and Trade-offs between Climate and Local Air Pollution: Policies in Sweden," Working Papers in Economics 529, University of Gothenburg, Department of Economics.

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