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Prices vs Quantities with Multiple Pollutants

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  • Ambec, Stefan
  • Coria, Jessica

Abstract

We examine the choice of policy instrument price, quantity, or a mix of the two when two pollutants are regulated and firms’ abatement costs are private information. A key parameter that affects this choice is the technological externality between the abatement efforts involved, i.e., whether they are substitutes or complements. If they are complements, a mix policy instrument with a tax on one pollutant and a quota on the other is sometime preferable, even if the pollutants are identical in terms of benefits and costs of abatement. Yet, if they are substitutes, the mix policy is dominated by taxes or quotas.
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Suggested Citation

  • Ambec, Stefan & Coria, Jessica, 2011. "Prices vs Quantities with Multiple Pollutants," LERNA Working Papers 11.17.351, LERNA, University of Toulouse.
  • Handle: RePEc:ler:wpaper:25076
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    References listed on IDEAS

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    More about this item

    JEL classification:

    • D62 - Microeconomics - - Welfare Economics - - - Externalities
    • Q50 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - General
    • Q53 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Air Pollution; Water Pollution; Noise; Hazardous Waste; Solid Waste; Recycling
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy

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