Heterogeneity in Costs and Second-Best Policies for Environmental Protection

This paper investigates heterogeneity in pollution abatement costs using a computable general equilibrium framework. Previous literature using aggregated data has found that "grandfathered" tradable permits are dominated by other instruments including emission taxes, performance standards, and technology mandates because of interactions with pre-existing taxes. However, when the underlying costs of abatement are heterogeneous, a disaggregate representation of costs yields qualitatively different findings. In a disaggregate model of NOX abatement in the United States, the relative performance of tradable permits improves significantly and out-performs command and control approaches over a wide range of emission reductions.


Issue Date:
2000
Publication Type:
Working or Discussion Paper
PURL Identifier:
http://purl.umn.edu/10875
Total Pages:
34
JEL Codes:
D58; H21; L51
Series Statement:
Discussion Paper 00-20




 Record created 2017-04-01, last modified 2017-08-23

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