IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Log in (now much improved!) to save this paper

Price versus Quantities versus Indexed Quantities

Listed author(s):
  • Frédéric Branger

    (AgroParistech ENGREF and CIRED (France))

  • Philippe Quirion

    (CIRED and CNRS (France))

We develop a stochastic model to rank different policies (tax, fixed cap and relative cap) according to their expected total social costs. Three types of uncertainties are taken into account: uncertainty about abatement costs, business-as-usual (BAU) emissions and future economic output (the two latter being correlated). Two parameters: the ratio of slopes of marginal benefits and marginal costs, and the above-mentioned correlation, are crucial to determine which instrument is preferred. When marginal benefits are relatively flatter than marginal costs, prices are preferred over fixed caps (Weitzman’s result). When the former correlation is higher than a parameter- dependent threshold, relative caps are preferred to fixed caps. An intermediate condition is found to compare the tax instrument and the relative cap. The model is then empirically tested for seven different regions (China, the United States, Europe, India, Russia, Brazil and Japan). We find that tax is preferred to caps (absolute or relative) in all cases, and that relative caps are preferred to fixed caps in the US and emerging countries (except Brazil where it is ambiguous), whereas fixed cap are preferred to relative cap in Europe and Japan.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://www.feem.it/userfiles/attach/201410161717124NDL2014-085.pdf
Download Restriction: no

Paper provided by Fondazione Eni Enrico Mattei in its series Working Papers with number 2014.85.

as
in new window

Length:
Date of creation: Oct 2014
Handle: RePEc:fem:femwpa:2014.85
Contact details of provider: Postal:
Corso Magenta, 63 - 20123 Milan

Phone: 0039-2-52036934
Fax: 0039-2-52036946
Web page: http://www.feem.it/
Email:


More information through EDIRC

References listed on IDEAS
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.:

as
in new window


  1. Marschinski, Robert & Edenhofer, Ottmar, 2010. "Revisiting the case for intensity targets: Better incentives and less uncertainty for developing countries," Energy Policy, Elsevier, vol. 38(9), pages 5048-5058, September.
  2. Martin L. Weitzman, 1974. "Prices vs. Quantities," Review of Economic Studies, Oxford University Press, vol. 41(4), pages 477-491.
  3. Stern, David I., 2004. "The Rise and Fall of the Environmental Kuznets Curve," World Development, Elsevier, vol. 32(8), pages 1419-1439, August.
  4. John P. Weyant, Francisco C. de la Chesnaye, and Geoff J. Blanford, 2006. "Overview of EMF-21: Multigas Mitigation and Climate Policy," The Energy Journal, International Association for Energy Economics, vol. 0(Special I), pages 1-32.
  5. Newell, Richard G. & Pizer, William A., 2008. "Indexed regulation," Journal of Environmental Economics and Management, Elsevier, vol. 56(3), pages 221-233, November.
  6. Gene M. Grossman & Alan B. Krueger, 1995. "Economic Growth and the Environment," The Quarterly Journal of Economics, Oxford University Press, vol. 110(2), pages 353-377.
  7. Frank Jotzo & John Pezzey, 2007. "Optimal intensity targets for greenhouse gas emissions trading under uncertainty," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 38(2), pages 259-284, October.
  8. Holland, Stephen P., 2012. "Emissions taxes versus intensity standards: Second-best environmental policies with incomplete regulation," Journal of Environmental Economics and Management, Elsevier, vol. 63(3), pages 375-387.
  9. Pizer, William, 2005. "The Case for Intensity Targets," Discussion Papers dp-05-02, Resources For the Future.
  10. Stavins, Robert N., 1996. "Correlated Uncertainty and Policy Instrument Choice," Journal of Environmental Economics and Management, Elsevier, vol. 30(2), pages 218-232, March.
  11. Lawrence H. Goulder & Andrew R. Schein, 2013. "Carbon Taxes Versus Cap And Trade: A Critical Review," Climate Change Economics (CCE), World Scientific Publishing Co. Pte. Ltd., vol. 4(03), pages 1-28.
  12. Quirion, Philippe, 2005. "Does uncertainty justify intensity emission caps?," Resource and Energy Economics, Elsevier, vol. 27(4), pages 343-353, November.
  13. Newell, Richard G. & Pizer, William A., 2003. "Regulating stock externalities under uncertainty," Journal of Environmental Economics and Management, Elsevier, vol. 45(2, Supple), pages 416-432, March.
  14. Hoel, Michael & Karp, Larry, 2002. "Taxes versus quotas for a stock pollutant," Resource and Energy Economics, Elsevier, vol. 24(4), pages 367-384, November.
  15. Jacoby, Henry D. & Ellerman, A. Denny, 2004. "The safety valve and climate policy," Energy Policy, Elsevier, vol. 32(4), pages 481-491, March.
  16. Marschinski, Robert & Lecocq, Franck, 2006. "Do intensity targets control uncertainty better than quotas ? Conditions, calibrations, and caveats," Policy Research Working Paper Series 4033, The World Bank.
  17. Barros, Vincente & Grand, Mariana Conte, 2002. "Implications of a dynamic target of greenhouse gases emission reduction: the case of Argentina," Environment and Development Economics, Cambridge University Press, vol. 7(03), pages 547-569, July.
  18. Webster, Mort & Sue Wing, Ian & Jakobovits, Lisa, 2010. "Second-best instruments for near-term climate policy: Intensity targets vs. the safety valve," Journal of Environmental Economics and Management, Elsevier, vol. 59(3), pages 250-259, May.
  19. Pezzey, John C.V. & Jotzo, Frank, 2012. "Tax-versus-trading and efficient revenue recycling as issues for greenhouse gas abatement," Journal of Environmental Economics and Management, Elsevier, vol. 64(2), pages 230-236.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:fem:femwpa:2014.85. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (barbara racah)

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 references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link 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 profile, as there may be some citations waiting for confirmation.

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

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.