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Emissions Taxes and Abatement Regulation Under Uncertainty

Christiansen, V; Smith, S; (2015) Emissions Taxes and Abatement Regulation Under Uncertainty. Environmental and Resource Economics , 60 (1) 17 - 35. 10.1007/s10640-013-9755-7. Green open access

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Abstract

We consider environmental regulation in a context where firms invest in abatement technology under conditions of uncertainty about subsequent abatement cost, but can subsequently adjust output in the light of true marginal abatement cost. Where an emissions tax is the only available instrument, policy faces a trade-off between the incentive to invest in abatement technology and efficiency in subsequent output decisions. More efficient outcomes can be achieved by supplementing the emissions tax with direct regulation of abatement technology, or by combining the tax with an abatement technology investment subsidy. We compare the properties of these alternative instrument combinations.

Type: Article
Title: Emissions Taxes and Abatement Regulation Under Uncertainty
Open access status: An open access version is available from UCL Discovery
DOI: 10.1007/s10640-013-9755-7
Publisher version: http://dx.doi.org/10.1007/s10640-013-9755-7
Language: English
Additional information: This article is distributed under the terms of the Creative Commons Attribution License which permits any use, distribution, and reproduction in any medium, provided the original author(s) and the source are credited. https://creativecommons.org/licenses/by/3.0/
Keywords: Externalities, Pigouvian taxes, Regulation, Subsidies
UCL classification: UCL > Provost and Vice Provost Offices
UCL > Provost and Vice Provost Offices > UCL SLASH
UCL > Provost and Vice Provost Offices > UCL SLASH > Faculty of SandHS > Dept of Economics
URI: https://discovery.ucl.ac.uk/id/eprint/1469529
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