Pollution markets with imperfectly observed emissions
AbstractI study the advantages of pollution permit markets over traditional standard regulations when the regulator has incomplete information on firms’ emissions and costs of production and abatement (e.g., air pollution in large cities). Because the regulator only observes each firm’s abatement technology but neither its emissions nor its output, there are cases in which standards can lead to lower emissions and, hence, welfare dominate permits. If permits are optimally combined with standards, in many cases this hybrid policy converges to the permits-alone policy but (almost) never to the standards-alone policy.
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Bibliographic InfoPaper provided by Massachusetts Institute of Technology, Center for Energy and Environmental Policy Research in its series Working Papers with number 0414.
Date of creation: Sep 2004
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Other versions of this item:
- Juan-Pablo Montero, 2005. "Pollution Markets with Imperfectly Observed Emissions," RAND Journal of Economics, The RAND Corporation, vol. 36(3), pages 645-660, Autumn.
- Montero, J-P., 2004. "Pollution Markets with Imperfectly Observed Emissions," Cambridge Working Papers in Economics 0456, Faculty of Economics, University of Cambridge.
- L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
- Q28 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Government Policy
This paper has been announced in the following NEP Reports:
- NEP-ALL-2006-08-12 (All new papers)
- NEP-ENE-2006-08-12 (Energy Economics)
- NEP-ENV-2006-08-12 (Environmental Economics)
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