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Pollution standards vs charges under uncertainty

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  • Peter Tisato

Abstract

Conventional analysis of pollution control policy under uncertainty does not properly account for the potential cost effectiveness difference between standards and charges, thus drawing misleading conclusions for the case of inefficient standards. Correcting for this anomaly, the following conclusions can be drawn. When uncertainty involves the position of the marginal damage cost schedule, rather than policy indifference, a charge is always superior to an inefficient standard. When uncertainty is about the position of the marginal control cost schedule, policy indifference may occur, but if it does it must be the case that the slope of marginal damage cost exceeds that of marginal control cost. Copyright Kluwer Academic Publishers 1994

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  • Peter Tisato, 1994. "Pollution standards vs charges under uncertainty," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 4(3), pages 295-304, June.
    • Handle: RePEc:kap:enreec:v:4:y:1994:i:3:p:295-304
    DOI: 10.1007/BF00692330
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    References listed on IDEAS

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    1. Helfand, Gloria E, 1991. "Standards versus Standards: The Effects of Different Pollution Restrictions," American Economic Review, American Economic Association, vol. 81(3), pages 622-634, June.
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    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.
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    Cited by:

    1. 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.
    2. MOROTOMI Toru, 2004. "Climate Change Policy and Combination of Multiple Policy Instruments (in Japanese)," ESRI Discussion paper series 111, Economic and Social Research Institute (ESRI).
    3. Clemens Heuson, 2008. "Emission standards vs. taxes: The case of asymmetric Cournot duopoly and uncertain control costs," Working Papers 045, Bavarian Graduate Program in Economics (BGPE).
    4. Verhoef, Erik T. & Nijkamp, Peter, 1999. "Second-best energy policies for heterogeneous firms," Energy Economics, Elsevier, vol. 21(2), pages 111-134, April.
    5. Clemens Heuson, 2008. "Weitzman revisited: Emission standards vs. taxes with uncertain control costs and market power of polluting firms," Discussion Paper Series 299, Universitaet Augsburg, Institute for Economics.

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