 Prices vs. Quantities: An Empirical Study of Firms' Instrument ChoiceIris Maria Oberauner Working papers from Faculty of Business and Economics - University of Basel Abstract: A longstanding theoretical discussion on the merits of prices vs. quantities for regulating emissions under uncertainty exists in environmental policy literature. However, empirical evidence w.r.t. instrument choice has not been put forward so far. In particular, very little is known about instrument preferences from the perspective of firms. Investigating Swiss climate policy provides an ideal field for encountering both of the above concerns. In Switzerland, firms can selfselect between a tax (with a wage-based tax exemption) and emissions trading (with a grandfathering mode of permit allocation) to regulate their CO2 emissions. In our paper, we empirically investigate this selfselection mechanism based on a cross section of Swiss firm-level data. Specific theory on Swiss policy design identifies the influential factors as being permit allocation, wages, uncertainty in abatement costs and the flexibility of firms' abatement technologies. We confirm evidence for the first two factors, but were unable to find evidence for the latter ones. Moreover, high-abatement firms tend to choose permit trading. Keywords: Prices vs. Quantities; Instrument Choice; Swiss Climate Policy; Environmental Policy à la Carte (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:bsl:wpaper:2010/07 Access Statistics for this paper More papers in Working papers from Faculty of Business and Economics - University of Basel Contact information at EDIRC. |
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