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Taxes and quotas for a stock pollutant with multiplicative uncertainty

Taxes and quotas for a stock pollutant with multiplicative uncertainty
Taxes and quotas for a stock pollutant with multiplicative uncertainty
We compare taxes and quotas when firms and the regulator have asymmetric information about the slope of firms’ abatement costs. Damages are caused by a stock pollutant. We calibrate the model using cost and damage estimates of greenhouse gasses. Taxes dominate quotas, as with additive uncertainty. This model with multiplicative uncertainty allows us to compare expected stock levels under the two policies, and to investigate the importance of stock size and the magnitude of uncertainty on the policy ranking.
pollution control, asymmetric information, taxes and quotas, stochastic control, global warming, multiplicative disturbances
91-114
Hoel, Michael
14458a1d-bd96-4d1c-9058-b7514304bdfc
Karp, Larry
c0e2efad-f4e6-4fb9-9630-aaa8cf37b72e
Hoel, Michael
14458a1d-bd96-4d1c-9058-b7514304bdfc
Karp, Larry
c0e2efad-f4e6-4fb9-9630-aaa8cf37b72e

Hoel, Michael and Karp, Larry (2001) Taxes and quotas for a stock pollutant with multiplicative uncertainty. Journal of Public Economics, 82 (1), 91-114. (doi:10.1016/S0047-2727(00)00136-5).

Record type: Article

Abstract

We compare taxes and quotas when firms and the regulator have asymmetric information about the slope of firms’ abatement costs. Damages are caused by a stock pollutant. We calibrate the model using cost and damage estimates of greenhouse gasses. Taxes dominate quotas, as with additive uncertainty. This model with multiplicative uncertainty allows us to compare expected stock levels under the two policies, and to investigate the importance of stock size and the magnitude of uncertainty on the policy ranking.

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More information

Published date: 2001
Keywords: pollution control, asymmetric information, taxes and quotas, stochastic control, global warming, multiplicative disturbances

Identifiers

Local EPrints ID: 33487
URI: http://eprints.soton.ac.uk/id/eprint/33487
DOI: doi:10.1016/S0047-2727(00)00136-5
PURE UUID: ed69b6f8-70be-407d-912a-616dba63d0eb

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Date deposited: 16 May 2006
Last modified: 15 Mar 2024 07:44

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Contributors

Author: Michael Hoel
Author: Larry Karp

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