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Can Uncertainty Justify Overlapping Policy Instruments to Mitigate Emissions?

  • Oskar Lecuyer

    ()

    (CIRED - Centre International de Recherche sur l'Environnement et le Développement - CIRAD : UMR56 - CNRS : UMR8568 - Ecole des Hautes Etudes en Sciences Sociales (EHESS) - Ecole des Ponts ParisTech - AgroParisTech)

  • Philippe Quirion

    ()

    (CIRED - Centre International de Recherche sur l'Environnement et le Développement - CIRAD : UMR56 - CNRS : UMR8568 - Ecole des Hautes Etudes en Sciences Sociales (EHESS) - Ecole des Ponts ParisTech - AgroParisTech)

This article constitutes a new contribution to the analysis of overlapping instruments to cover the same emission sources. Using both an analytical and a numerical model, we find that when the risk that the CO2price drops to zero and the political unavailability of a CO2tax (at least in the European Union) are taken into account, it can be socially beneficial to implement an additional instrument encouraging the reduction of emissions, for instance a renewable energy subsidy. Our analysis has both a practical and a theoretical purpose. It aims at giving economic insight to policymakers in a context of increased uncertainty concerning the future stringency of the European Emission Trading Scheme. It also gives another rationale for the use of several instruments to cover the same emission sources, and shows the importance of accounting for corner solutions in the definition of the optimal policy mix.

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Paper provided by HAL in its series Post-Print with number hal-00801927.

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Date of creation: 2012
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Publication status: Published, FEEM Working Paper, 2012, No. 91.2012
Handle: RePEc:hal:journl:hal-00801927
Note: View the original document on HAL open archive server: http://hal-enpc.archives-ouvertes.fr/hal-00801927
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