A Note on Correlated Uncertainty and Hybrid Environmental Policies

John Stranlund ()

Environmental & Resource Economics, 2015, vol. 61, issue 4, 463-476

Abstract: This note examines the effects of correlated uncertainty between abatement costs and pollution damage on hybrid emissions control policies. In particular, I show how correlated uncertainty affects the structure and performance of control policies that combine permit trading with price controls. Moreover, I show how correlated uncertainty affects the choice between a simple emissions tax versus a hybrid policy. Under correlated uncertainty, constant marginal damage is no longer necessary or sufficient for a tax to be an optimal policy. Copyright Springer Science+Business Media Dordrecht 2015

Keywords: Cap-and-trade; Correlated uncertainty; Emissions trading; Emissions taxes; Hybrid policies; Price controls; H23; L51; Q58 (search for similar items in EconPapers)
Date: 2015
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DOI: 10.1007/s10640-014-9802-z

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