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| Author: | Mandell, S. |
| Title: | Optimal mix of emissions taxes and cap-and-trade |
| Journal: | Journal of Environmental Economics and Management
2008 : SEP, VOL. 56:2, p. 131-140 |
| Index terms: | pollution taxation regulations uncertainty tradeable permits |
| Language: | eng |
| Abstract: | Different emitters of a particular pollutant are sometimes subjected to different control mechanisms. This article examines the situation where a part of the economy is regulated by a cap-and-trade program, while the rest is subjected to an emissions tax. Using an extended version of Weitzman's "Prices vs. Quantities" model, this study analyzes the conditions under which this is superior, from an efficiency point of view, to subjecting the whole economy to either of these control mechanisms. The paper addresses a crucial trade-off between two sources of efficiency loss. One is due to cost-effectiveness issues and another is due to emissions volume. It is this trade-off that determines the size of each sector. |
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