Taxes versus Quotas for a Stock Pollutant
نویسندگان
چکیده
We compare the effects of taxes and quotas for an environmental problem where the regulator and polluter have asymmetric information about abatement costs, and environmental damage depends on pollution stock. An increase in the slope of the marginal abatement cost curve, or a decrease in the slope of the marginal damage curve, favors taxes. An increase in the discount rate or the stock decay rate favors tax usage. Taxes 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. © 2002 Elsevier Science B.V. All rights reserved. JEL classification: H21; Q28
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