Taxes versus quotas for a stock pollutant

Hoel, Michael and Karp, Larry (2002) Taxes versus quotas for a stock pollutant. Resource and Energy Economics, 24, (4), 367-384. (doi:10.1016/S0928-7655(02)00014-3).


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We compare the effects of taxes and quotas for an environmental problem where the regulator and polluter have asymmetric information about abatement costs, and environmental damage depends on pollution stock. An increase in the slope of the marginal abatement cost curve, or a decrease in the slope of the marginal damage curve, favors taxes.

An increase in the discount rate or the stock decay rate favors tax usage. Taxes dominate quotas if the length of a period during which decisions are constant is sufficiently small. An empirical illustration suggests that taxes dominate quotas for the control of greenhouse gasses.

Item Type: Article
Digital Object Identifier (DOI): doi:10.1016/S0928-7655(02)00014-3
ISSNs: 0928-7655 (print)
Related URLs:
Keywords: pollution control, asymmetric information, taxes and quotas, stochastic control
Subjects: H Social Sciences > H Social Sciences (General)
Divisions : University Structure - Pre August 2011 > School of Social Sciences > Economics
ePrint ID: 39691
Accepted Date and Publication Date:
Date Deposited: 29 Jun 2006
Last Modified: 31 Mar 2016 12:09

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