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Asymmetry of price control and quantity control in an environmental policy

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  • Eiji Hosoda

    (Keio University)

Abstract

It is usually supposed that price control and quantity control are symmetrical in an environmental policy when there is no uncertainty. Thus, an emission charge is as effective as the trade of emission rights or entitlements as a tool for emission control. We show that the two instruments are asymmetrical under special technical conditions, even if there is no uncertainty: If there is an independent costly disposal process, whether it is a recycling process or an abatement process, in a constant-returns-to-scale economy, an emission charge cannot pinpoint a specific level of emissions whereas a quantity control such as trade of emission rights can do so, realizing the same value of emission charges as a shadow price or the price of emission rights.

Suggested Citation

  • Eiji Hosoda, 2000. "Asymmetry of price control and quantity control in an environmental policy," Environmental Economics and Policy Studies, Springer;Society for Environmental Economics and Policy Studies - SEEPS, vol. 3(4), pages 381-397, December.
    • Handle: RePEc:spr:envpol:v:3:y:2000:i:4:d:10.1007_bf03354047
    DOI: 10.1007/BF03354047
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    References listed on IDEAS

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    1. Martin L. Weitzman, 1974. "Prices vs. Quantities," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 41(4), pages 477-491.
    2. Eiji Hosoda, 1996. "An Environmental Restriction And Income Distribution In A Capitalist Economy," Metroeconomica, Wiley Blackwell, vol. 47(3), pages 236-265, October.
    3. Converse, Alvin O., 1974. "Environmental controls and economic growth," Journal of Economic Theory, Elsevier, vol. 7(4), pages 411-417, April.
    4. Spulber, Daniel F., 1985. "Effluent regulation and long-run optimality," Journal of Environmental Economics and Management, Elsevier, vol. 12(2), pages 103-116, June.
    5. Hosoda, Eiji, 1994. "Growth and Distribution under an Environmental Restriction," The Manchester School of Economic & Social Studies, University of Manchester, vol. 62(1), pages 60-80, March.
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