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Can Uncertainty Justify Overlapping Policy Instruments to Mitigate Emissions?

Author

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  • Oskar Lecuyer

    (CIRED - centre international de recherche sur l'environnement et le développement - CNRS - Centre National de la Recherche Scientifique - ENPC - École des Ponts ParisTech - EHESS - École des hautes études en sciences sociales - AgroParisTech - Cirad - Centre de Coopération Internationale en Recherche Agronomique pour le Développement)

  • Philippe Quirion

    (CIRED - centre international de recherche sur l'environnement et le développement - CNRS - Centre National de la Recherche Scientifique - ENPC - École des Ponts ParisTech - EHESS - École des hautes études en sciences sociales - AgroParisTech - Cirad - Centre de Coopération Internationale en Recherche Agronomique pour le Développement)

Abstract

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 CO2 price drops to zero and the political unavailability of a CO2 tax (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.

Suggested Citation

  • Oskar Lecuyer & Philippe Quirion, 2012. "Can Uncertainty Justify Overlapping Policy Instruments to Mitigate Emissions?," Post-Print hal-00801927, HAL.
  • Handle: RePEc:hal:journl:hal-00801927
    Note: View the original document on HAL open archive server: https://hal-enpc.archives-ouvertes.fr/hal-00801927
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    References listed on IDEAS

    as
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    Keywords

    CO2; carbon emissions; tax; European Emission Trading Scheme;
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