Taxes Versus Quotas for a Stock Pollutant

Michael Hoel and Larry Karp

No 25010, CUDARE Working Papers from University of California, Berkeley, Department of Agricultural and Resource Economics

Abstract: We compare the effects of taxes and quotas for an environmental problem in which the regulator and polluter have asymmetric information about abatement costs, and the environmental damage depends on the stock of pollution. We thus extend, to a dynamic framework, previous studies in which environmental damages depend on the flow of pollution. As with the static analysis, an increase in the slope of the marginal abatement cost curve, or a decrease in the slope of the marginal damage curve, favors taxes. In addition, in the dynamic model, an increase in the discount rate or the stock decay rate favor the use of taxes. Taxes certainly dominate quotas if the length of a period during which decisions are constant is sufficiently small. An empirical illustration suggests that taxes dominate quotas for the control of greenhouse gasses.

Keywords: Environmental; Economics; and; Policy (search for similar items in EconPapers)
Pages: 35
Date: 2001
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Citations: View citations in EconPapers (37)

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Related works:
Journal Article: Taxes versus quotas for a stock pollutant (2002)
Working Paper: Taxes versus Quotas for a Stock Pollutant (2001)
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Persistent link: https://EconPapers.repec.org/RePEc:ags:ucbecw:25010

DOI: 10.22004/ag.econ.25010

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