Research Papers in Economics, Department of Economics, Stockholm University
A Generalized Hybrid Approach to Controlling Emissions
Abstract: This paper examines the optimal instrument choice to
control emissions under uncertainty. A hybrid regulation mechanism is
developed that contains cap-and-trade, emissions taxes and socalled safety
valves as special cases. This makes it possible to examine optimal policy
choice and the resulting efficiency losses for each instrument. It is shown
that the hybrid regulation mechanism in efficiency terms is weakly superior
to the other instruments. The model is also used to study optimal response
to non-optimal policy implementations.
Keywords: Emissions tax; Emissions trading; Safety valve; Ranking; Uncertainty; (follow links to similar papers)
JEL-Codes: H23; Q28; Q58; (follow links to similar papers)
18 pages, November 10, 2004
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