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Taxes versus quotas for a stock pollutant

Taxes versus quotas for a stock pollutant
Taxes versus quotas for a stock pollutant
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.
pollution control, asymmetric information, taxes and quotas, stochastic control
0928-7655
367-384
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 (2002) Taxes versus quotas for a stock pollutant. Resource and Energy Economics, 24 (4), 367-384. (doi:10.1016/S0928-7655(02)00014-3).

Record type: Article

Abstract

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.

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More information

Published date: 2002
Keywords: pollution control, asymmetric information, taxes and quotas, stochastic control

Identifiers

Local EPrints ID: 39691
URI: http://eprints.soton.ac.uk/id/eprint/39691
DOI: doi:10.1016/S0928-7655(02)00014-3
ISSN: 0928-7655
PURE UUID: 8c28c5b4-9d2a-4ef9-af6b-1056c081146e

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Date deposited: 29 Jun 2006
Last modified: 15 Mar 2024 08:16

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Contributors

Author: Michael Hoel
Author: Larry Karp

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