Second Best Environmental Policies under Uncertainty

We construct a strategic trade model of an international duopoly, whereby production by exporting firms generates a local pollutant. Governments use environmental policies, i.e., an emissions standard or a tax, to control pollution and for rent shifting purposes. Contrary to their firm, however, governments are unable to perfectly foresee the actual level of demand, the cost of abatement and the damage caused from pollution. Under these modes of uncertainty we derive sufficient conditions under which the governments optimally choose an emissions tax over an emissions standard.


Issue Date:
2010-01
Publication Type:
Working or Discussion Paper
PURL Identifier:
http://purl.umn.edu/59375
Total Pages:
34
JEL Codes:
F12; F18; Q58
Series Statement:
SD
3.2010




 Record created 2017-04-01, last modified 2017-08-25

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