IDEAS home Printed from https://ideas.repec.org/a/ebl/ecbull/eb-15-00165.html
   My bibliography  Save this article

Implications of nonlinearity in environmental instrument choice

Author

Listed:
  • Kathy Paulson-Gjerde

    (Butler University)

  • Peter Z Grossman

    (Butler University)

Abstract

The classic paper by Weitzman (1974) on environmental instrument choice showed that relative efficiency of a price or quantity instrument depended on the elasticities of the marginal cost and benefit functions. Linear models with additive or multiplicative errors lent support for many of Weitzman's results. This paper investigates nonlinear functions and again shows Weitzman largely correct. Moreover it supports a conjecture he made about the relative efficacy of price versus quantity instruments.

Suggested Citation

  • Kathy Paulson-Gjerde & Peter Z Grossman, 2015. "Implications of nonlinearity in environmental instrument choice," Economics Bulletin, AccessEcon, vol. 35(4), pages 2252-2257.
    • Handle: RePEc:ebl:ecbull:eb-15-00165
    as

    Download full text from publisher

    File URL: http://www.accessecon.com/Pubs/EB/2015/Volume35/EB-15-V35-I4-P227.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Gary W. Yohe, 1978. "Towards a General Comparison of Price Controls and Quantity Controls under Uncertainty," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 45(2), pages 229-238.
    2. Martin L. Weitzman, 1974. "Prices vs. Quantities," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 41(4), pages 477-491.
    3. Fishelson, Gideon, 1976. "Emission control policies under uncertainty," Journal of Environmental Economics and Management, Elsevier, vol. 3(3), pages 189-197, October.
    4. Shrestha, Ratna K., 2001. "The choice of environmental policy instruments under correlated uncertainty," Resource and Energy Economics, Elsevier, vol. 23(2), pages 175-185, April.
    5. Watson, William D. & Ridker, Ronald G., 1984. "Losses from effluent taxes and quotas under uncertainty," Journal of Environmental Economics and Management, Elsevier, vol. 11(4), pages 310-326, December.
    6. Lawrence H. Goulder & Ian W. H. Parry, 2008. "Instrument Choice in Environmental Policy," Review of Environmental Economics and Policy, Association of Environmental and Resource Economists, vol. 2(2), pages 152-174, Summer.
    7. Adar, Zvi & Griffin, James M., 1976. "Uncertainty and the choice of pollution control instruments," Journal of Environmental Economics and Management, Elsevier, vol. 3(3), pages 178-188, October.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Tang, Bao-Jun & Wang, Xiang-Yu & Wei, Yi-Ming, 2019. "Quantities versus prices for best social welfare in carbon reduction: A literature review," Applied Energy, Elsevier, vol. 233, pages 554-564.
    2. de Palma, André & Lindsey, Robin, 2020. "Tradable permit schemes for congestible facilities with uncertain supply and demand," Economics of Transportation, Elsevier, vol. 21(C).
    3. Hansen, Lars Gårn & Jensen, Frank, 2017. "Regulating fisheries under uncertainty," Resource and Energy Economics, Elsevier, vol. 50(C), pages 164-177.
    4. Akira Maeda, 2012. "Setting trigger price in emissions permit markets equipped with a safety valve mechanism," Journal of Regulatory Economics, Springer, vol. 41(3), pages 358-379, June.
    5. Rohling, Moritz & Ohndorf, Markus, 2012. "Prices vs. Quantities with fiscal cushioning," Resource and Energy Economics, Elsevier, vol. 34(2), pages 169-187.
    6. Shrestha, Ratna K., 2001. "The choice of environmental policy instruments under correlated uncertainty," Resource and Energy Economics, Elsevier, vol. 23(2), pages 175-185, April.
    7. Baldursson, Fridrik M & von der Fehr, N.-H.M.Nils-Henrik M, 2004. "Price volatility and risk exposure: on market-based environmental policy instruments," Journal of Environmental Economics and Management, Elsevier, vol. 48(1), pages 682-704, July.
    8. Ian A. MacKenzie, 2017. "Rent creation and rent seeking in environmental policy," Public Choice, Springer, vol. 171(1), pages 145-166, April.
    9. Evan F. Koenig, 1985. "Indirect Methods for Regulating Externalities Under Uncertainty," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 100(2), pages 479-493.
    10. John Loomis & Bryon Allen, 2008. "Using Non Market Valuation to Inform the Choice Between Permits and Fees in Environmental Regulation," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 40(3), pages 329-337, July.
    11. Abrego, Lisandro & Perroni, Carlo, 1999. "Free-riding, carbon treaties, and trade wars: the role of domestic environmental policies," Journal of Development Economics, Elsevier, vol. 58(2), pages 463-483, April.
    12. Tun Lin & Timo Goeschl, 2004. "Biodiversity Conservation on Private Lands: Information Problems and Regulatory Choices," Working Papers 2004.55, Fondazione Eni Enrico Mattei.
    13. Wang, Banban & Pizer, William A. & Munnings, Clayton, 2022. "Price limits in a tradable performance standard," Journal of Environmental Economics and Management, Elsevier, vol. 116(C).
    14. Cropper, Maureen L & Oates, Wallace E, 1992. "Environmental Economics: A Survey," Journal of Economic Literature, American Economic Association, vol. 30(2), pages 675-740, June.
    15. Louis Kaplow, 2010. "Taxes, Permits, and Climate Change," NBER Working Papers 16268, National Bureau of Economic Research, Inc.
    16. Kennedy Peter W & Laplante Benoit & Whittington Dale, 2010. "Simple Pricing Schemes for Pollution Control under Asymmetric Information," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 10(1), pages 1-37, February.
    17. Segerson, Kathleen, 1994. "Environmental Policy And Risk," 1994 Quantifying Long Run Agricultural Risks and Evaluating Farmer Responses Risk, Technical Committee Meeting, March 24-26, 1994, Gulf Shores State Park, Alabama 271555, Regional Research Projects > S-232: Quantifying Long Run Agricultural Risks and Evaluating Farmer Responses to Risk.
    18. Segerson, Kathleen, 1988. "Uncertainty and incentives for nonpoint pollution control," Journal of Environmental Economics and Management, Elsevier, vol. 15(1), pages 87-98, March.
    19. Pizer, William A., 2002. "Combining price and quantity controls to mitigate global climate change," Journal of Public Economics, Elsevier, vol. 85(3), pages 409-434, September.
    20. Shortle, James S., 1984. "The Use Of Estimated Pollution Flows In Agricultural Pollution Control Policy: Implications For Abatement And Policy Instruments," Northeastern Journal of Agricultural and Resource Economics, Northeastern Agricultural and Resource Economics Association, vol. 13(2), pages 1-9, October.

    More about this item

    Keywords

    Environmental Instrument choice; nonlinearity;

    JEL classification:

    • Q5 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ebl:ecbull:eb-15-00165. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: John P. Conley (email available below). General contact details of provider: .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.