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Environmental policy ā la carte: Letting firms choose their regulation
JournalArticle (Originalarbeit in einer wissenschaftlichen Zeitschrift)
 
ID 404895
Author(s) Krysiak, Frank C.; Oberauner, Iris Maria
Author(s) at UniBasel Krysiak, Frank Christian
Year 2010
Title Environmental policy ā la carte: Letting firms choose their regulation
Journal Journal of environmental economics and management
Volume 60
Number 3
Pages / Article-Number 221-232
Keywords Environmental policy, Asymmetric information, Screening, Uncertainty, Prices-versus-quantities
Abstract

Under uncertainty, the optimal choice between price and quantity instruments depends on the technology of the regulated firms, which is often private information. We consider an environmental policy that delegates the prices-versus-quantities decision to the firms by offering them the choice between an emissions tax and permit trading. Such an approach is currently used in Swiss climate policy. We provide a detailed characterization of the optimal policy and show that this approach reduces expected social costs compared to a pure tax or permit-trading regime. We demonstrate that an optimal allocation of firms to instruments can be achieved despite substantial informational constraints, and that all firms gain from the introduction of the instrument choice compared to optimally designed single-instrument policies. Furthermore, we discuss the conditions under which this approach is likely to be preferable to a hybrid regulation.

Publisher Academic Press
ISSN/ISBN 0095-0696
edoc-URL http://edoc.unibas.ch/dok/A5840235
Full Text on edoc No
Digital Object Identifier DOI 10.1016/j.jeem.2010.07.001
ISI-Number WOS:000284439700006
Document type (ISI) Article
 
   

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