Taxes and Quotas for a Stock Pollutant with Multiplicative Uncertainty

Michael Hoel () and Larry Karp

No 1999.15, Working Papers from Fondazione Eni Enrico Mattei

Abstract: We compare taxes and quotas when firms and the regulator have asymmetric information about abatement costs. Damages are caused by a stock pollutant. Uncertainty enters multiplicatively, i.e. it affects the slope rather than the intercept of abatement costs. We calibrate the model using cost and damage estimates of greenhouse gases. As with additive uncertainty, taxes dominate quotas. The advantage of taxes is much greater with mulitiplicative, compared to additive uncertainty.

Keywords: Pollution control; asymmetric information; taxes and quotas; stochastic control; global warming; multiplicative disturbances (search for similar items in EconPapers)
JEL-codes: H21 Q28 (search for similar items in EconPapers)
Date: 1999-02
New Economics Papers: this item is included in nep-ene, nep-env, nep-pbe and nep-pub
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Citations: View citations in EconPapers (2)

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Related works:
Journal Article: Taxes and quotas for a stock pollutant with multiplicative uncertainty (2001)
Working Paper: TAXES AND QUOTAS FOR A STOCK POLLUTANT WITH MULTIPLICATIVE UNCERTAINTY (2000)
Working Paper: Taxes and Quotas for a Stock Pollutant with Multiplicative Uncertainty (2000)
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Persistent link: https://EconPapers.repec.org/RePEc:fem:femwpa:1999.15

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