A Pricing Mechanism for CO2 Emissions that Incorporates Future Revisions of Estimates of the Cost of Today?s Emissions
AbstractThe efficiency of mechanisms to control CO2 emissions is limited by disagreement about the harm from these emissions. Thus existing emission control mechanisms require negotiated compromise regarding either the efficient price or the level of emissions to be tolerated. As an alternative to conventional mechanisms, we offer a mechanism in which today?s price of emissions is determined by a market-based estimate of future beliefs about the cost of emissions. This reduces the uncertainty about the right price for emissions and makes it likely that emitters will base their emission decisions on more accurate estimates of the harm they cause.
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Bibliographic InfoPaper provided by Virginia Polytechnic Institute and State University, Department of Economics in its series Working Papers with number e07-9.
Length: 12 pages
Date of creation: 2007
Date of revision:
Environmental regulation; Climate change; Prediction market;
This paper has been announced in the following NEP Reports:
- NEP-ALL-2008-01-05 (All new papers)
- NEP-ENV-2008-01-05 (Environmental Economics)
- NEP-REG-2008-01-05 (Regulation)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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