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| Title: | Taxes Versus Quantities for a Stock Pollutant with Endogenous Abatement Costs and Asymmetric Information |
| Authors: | Karp, Larry
Zhang, Jiangfeng |
| Authors (Email): | Karp, Larry (karp@are.berkeley.edu)
Zhang, Jiangfeng (jzhang@adb.org) |
| Keywords: | Pollution control
Investment
Asymmetric information
Rational expectations
Choice of instruments |
| JEL Codes: | C61
D8
H21
Q28 |
| Issue Date: | 2008-07-21 |
| Series/Report no.: | CUDARE Working Papers
1064 |
| Abstract: | Non-strategic firms with rational expectations make investment and emissions decisions. The investment rule depends on firms’ beliefs about future emissions policies. We compare emissions taxes and quotas when the (strategic) regulator and (nonstrategic) firms have asymmetric information about abatement costs, and all agents use Markov Perfect decision rules. Emissions taxes create a secondary distortion at the investment stage, unless a particular condition holds; emissions quotas do not create a secondary distortion. We solve a linear-quadratic model calibrated to represent the problem of controlling greenhouse gasses. The endogeneity of abatement capital favors taxes, and it increases abatement. |
| URI: | http://purl.umn.edu/42877 |
| Institution/Association: | University of California, Berkeley>Department of Agricultural and Resource Economics>CUDARE Working Papers |
| Total Pages: | 40 |
| Collections: | CUDARE Working Papers
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Files in This Item:
| File |
Description |
Size | Format |
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| CUDARE 1064 Karp.pdf | | 386Kb | PDF | View/Open |
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