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The Pollution Game: A Classroom Exercise Demonstrating the Relative Effectiveness of Emissions Taxes and Tradable Permits

Jay Corrigan ()

Working Papers from Kenyon College, Department of Economics

Abstract: This classroom exercise illustrates the strengths and weaknesses of various regulatory frameworks aimed at internalizing negative externalities from pollution. Specifically, the exercise divides students into three groups—the government regulatory agency and two polluting firms—and allows them to work through a system of uniform command-and-control regulation, a tradable emissions permit framework, and an emissions tax. Students have the opportunity to observe how flexible, market-oriented regulatory frameworks can outperform inflexible command-and-control. More importantly given the ongoing debate about how best to regulate carbon dioxide emissions, students can also observe how the introduction of abatement-cost uncertainty can cause one market-oriented solution to outperform another.

Keywords: classroom experiments; emissions taxes; pollution; tradable emissions permits (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ene, nep-env, nep-exp and nep-pke
Date: 2009-06
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http://economics.kenyon.edu/corrigan/publications/Pollution%20Game.pdf (application/pdf)

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Persistent link: https://EconPapers.repec.org/RePEc:ken:wpaper:0902

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