IDEAS home Printed from https://ideas.repec.org/a/kap/enreec/v32y2005i2p273-300.html

Regulation of Stock Externalities with Correlated Abatement Costs

Author

Listed:
  • Larry Karp

  • Jiangfeng Zhang

Abstract

We study a dynamic regulation model where firms’ actions contribute to a stock externality. The regulator and firms have asymmetric information about serially correlated abatement costs. With price-based policies such as taxes, or if firms trade quotas efficiently, the regulator learns about the evolution of both the stock and costs. This ability to learn about costs is important in determining the ranking of taxes and quotas, and in determining the value of a feedback rather than an open-loop policy. For a range of parameter values commonly used in global warming studies, taxes dominate quotas, regardless of whether the regulator uses an open-loop or a feedback policy, and regardless of the extent of cost correlation. Copyright Springer 2005

Suggested Citation

  • Larry Karp & Jiangfeng Zhang, 2005. "Regulation of Stock Externalities with Correlated Abatement Costs," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 32(2), pages 273-300, October.
    • Handle: RePEc:kap:enreec:v:32:y:2005:i:2:p:273-300
    DOI: 10.1007/s10640-005-4678-6
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1007/s10640-005-4678-6
    Download Restriction: Access to full text is restricted to subscribers.
    File URL: https://libkey.io/10.1007/s10640-005-4678-6?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to

    for a different version of it.

    References listed on IDEAS

    as
    1. Brozovic, Nicholas & Sunding, David L. & Zilberman, David, 2004. "Prices versus Quantities Reconsidered," 2004 Annual meeting, August 1-4, Denver, CO 20257, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    2. Karp, Larry & Zhang, Jiangfeng, 2006. "Regulation with anticipated learning about environmental damages," Journal of Environmental Economics and Management, Elsevier, vol. 51(3), pages 259-279, May.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Emmerling, Johannes & Manoussi, Vassiliki & Xepapadeas, Anastasios, "undated". "Climate Engineering under Deep Uncertainty and Heterogeneity," MITP: Mitigation, Innovation and Transformation Pathways 244329, Fondazione Eni Enrico Mattei (FEEM).
    2. Halvor Briseid Storrøsten, 2012. "Prices vs. quantities: Technology choice, uncertainty and welfare," Discussion Papers 677, Statistics Norway, Research Department.
    3. Costello, Christopher & Karp, Larry, 2004. "Dynamic taxes and quotas with learning," Journal of Economic Dynamics and Control, Elsevier, vol. 28(8), pages 1661-1680, June.
    4. Newbery, David, 2018. "Policies for decarbonizing a liberalized power sector," Economics - The Open-Access, Open-Assessment E-Journal (2007-2020), Kiel Institute for the World Economy (IfW Kiel), vol. 12, pages 1-24.
    5. David M. Newbery & David M. Reiner & Robert A. Ritz, 2018. "When is a carbon price floor desirable?," Working Papers EPRG 1816, Energy Policy Research Group, Cambridge Judge Business School, University of Cambridge.
    6. Agliardi, Elettra & Xepapadeas, Anastasios, 2022. "Temperature targets, deep uncertainty and extreme events in the design of optimal climate policy," Journal of Economic Dynamics and Control, Elsevier, vol. 139(C).
    7. Yiwen Chen & Nora Paulus & Xi Wan & Benteng Zou, 2024. "To Deploy or Not to Deploy CCS Abatement, and When : A Differential Game Perspective," DEM Discussion Paper Series 24-07, Department of Economics at the University of Luxembourg.
    8. García, Jorge H. & Torvanger, Asbjørn, 2019. "Carbon leakage from geological storage sites: Implications for carbon trading," Energy Policy, Elsevier, vol. 127(C), pages 320-329.
    9. Traeger, Christian, 2021. "ACE - Analytic Climate Economy," CEPR Discussion Papers 15968, C.E.P.R. Discussion Papers.
    10. Mason, Charles F. & Polasky, Stephen & Tarui, Nori, 2017. "Cooperation on climate-change mitigation," European Economic Review, Elsevier, vol. 99(C), pages 43-55.
    11. Brock, W. A. & Xepapadeas, A., "undated". "Modeling Coupled Climate, Ecosystems, and Economic Systems," Climate Change and Sustainable Development 206837, Fondazione Eni Enrico Mattei (FEEM).
    12. Halvor Briseid Storrøsten, 2014. "Prices vs. Quantities with Endogenous Cost Structure," CESifo Working Paper Series 4625, CESifo.
    13. Muller, Nicholas Z., 2012. "The design of optimal climate policy with air pollution co-benefits," Resource and Energy Economics, Elsevier, vol. 34(4), pages 696-722.
    14. Ingham, Alan & Ma, Jie & Ulph, Alistair, 2007. "Climate change, mitigation and adaptation with uncertainty and learning," Energy Policy, Elsevier, vol. 35(11), pages 5354-5369, November.
    15. Edilio Valentini & Paolo Vitale, 2019. "Optimal Climate Policy for a Pessimistic Social Planner," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 72(2), pages 411-443, February.
    16. Baker, Erin & Shittu, Ekundayo, 2008. "Uncertainty and endogenous technical change in climate policy models," Energy Economics, Elsevier, vol. 30(6), pages 2817-2828, November.
    17. Karp, Larry & Traeger, Christian, 2024. "Taxes versus quantities reassessed," Journal of Environmental Economics and Management, Elsevier, vol. 125(C).
    18. Sugata Marjit & Arijit Mukherjee, 2023. "Low tariff on dirty goods—Environmental negligence or environmental concern?," Review of International Economics, Wiley Blackwell, vol. 31(4), pages 1246-1270, September.
    19. Larry Karp & Jinhua Zhao, 2010. "International Environmental Agreements: Emissions Trade, Safety Valves and Escape Clauses," Revue économique, Presses de Sciences-Po, vol. 61(1), pages 153-182.
    20. Francisco J André & Michael Finus, 2024. "Endogenous learning in international environmental agreements: the impact of research spillovers and the degree of cooperation," Oxford Economic Papers, Oxford University Press, vol. 76(3), pages 877-900.

    More about this item

    Keywords

    ;
    ;
    ;
    ;
    ;
    ;
    ;
    ;
    ;

    JEL classification:

    • C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
    • D8 - Microeconomics - - Information, Knowledge, and Uncertainty
    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • Q28 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Government Policy

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:kap:enreec:v:32:y:2005:i:2:p:273-300. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.springer.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.