 Emission regulation: Prices, quantities and hybrids with endogenous technology choiceHalvor Briseid Storrøsten Journal of Environmental Economics and Management, 2024, vol. 125, issue C Abstract: This paper examines the investment incentives of market-based regulation, focusing on the technology characteristics that different regulatory schemes tend to incentivize. The firms’ technology choice is socially optimal if and only if the aggregate emission allowance supply is completely inelastic. Furthermore, in the presence of uncertainty, elastic emission allowance supply, and strictly convex environmental damage, it is optimal to tax investments in technologies that induce a large variance in emissions. Lastly, price elastic supply of emission allowances may either increase or decrease the volatility in the product market, depending on the risk environment the firms face. The results indicate that introduction of permit price-stabilizing measures in an emission trading system will come at the cost of suboptimal technology investments, and may also lead to increased fluctuations in product prices. Keywords: Regulation; Technology choice; Uncertainty; Investment; Welfare (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:jeeman:v:125:y:2024:i:c:s0095069624000597 DOI: 10.1016/j.jeem.2024.102985 Access Statistics for this article Journal of Environmental Economics and Management is currently edited by M.A. Cole, A. Lange, D.J. Phaneuf, D. Popp, M.J. Roberts, M.D. Smith, C. Timmins, Q. Weninger and A.J. Yates More articles in Journal of Environmental Economics and Management from Elsevier |
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