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Author: | Baldursson, F.M. Fehr, N-H. M. von der |
Title: | Price volatility and risk exposure: on market-based environmental policy instruments |
Journal: | Journal of Environmental Economics and Management
2005 : JUL, VOL. 48:1, p. 682-704 |
Index terms: | prices risk aversion trade volatility |
Language: | eng |
Abstract: | This article investigates the efficacy of price and quantity controls as environmental policy instruments in a stochastic setting in which agents are risk averse. The authors demonstrate that the assumption of risk aversion may improve the performance of a tax relative to that of a system of tradable quotas, and that restricting quota trade may enhance efficiency even though risk aversion in itself limits volumes of trade. |
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