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| Author: | Webster, M. Wing, I.S. Jakobovits, L. |
| Title: | Second-best instruments for near-term climate policy: Intensity targets vs. the safety valve |
| Journal: | Journal of Environmental Economics and Management
2010 : MAY, VOL. 59:3, p. 250-259 |
| Index terms: | uncertainty climate policy |
| Language: | eng |
| Abstract: | In the United States, current proposals for greenhouse gas emissions regulations take the form of emissions caps with tradable permits. Economic theory predicts that a price instrument is superior to a quantity instrument under uncertainty in the case of stock pollutants. There has been interest in two other policy instrument designs: hybrid policies and intensity targets. In this paper, the Weitzman model is extended to derive an analytical expression for the expected net benefits of a hybrid instrument under uncertainty. In general, the results reveal that unrealistically high correlations are required for the intensity target to be preferred to a hybrid, making a hybrid a more practical instrument in practice. |
SCIMA