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Emissions Taxes and Abatement Regulation under Uncertainty

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  • Vidar Christiansen
  • Stephen Smith

Abstract

We consider environmental regulation in a context where firms invest in abatement technology under conditions of uncertainty about subsequent abatement cost, but can subsequently adjust output in the light of true marginal abatement cost. Where an emission tax is the only available instrument, policy faces a trade-off between the incentive to invest in abatement technology and efficiency in subsequent output decisions. More efficient outcomes can be achieved through combined use of tax and mandated use of a given abatement technology or through combining the tax with an abatement technology investment subsidy. We compare the properties of the two potential supplements to the emissions tax.

Suggested Citation

  • Vidar Christiansen & Stephen Smith, 2013. "Emissions Taxes and Abatement Regulation under Uncertainty," CESifo Working Paper Series 4121, CESifo.
    • Handle: RePEc:ces:ceswps:_4121
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    References listed on IDEAS

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    Cited by:

    1. Amundsen, Eirik S. & Gårn Hansen, Lars & Whitta-Jacobsen, Hans Jørgen, 2018. "Regulation of location-specific externalities," Working Papers in Economics 9/18, University of Bergen, Department of Economics.
    2. Antimiani, Alessandro & Costantini, Valeria & Kuik, Onno & Paglialunga, Elena, 2016. "Mitigation of adverse effects on competitiveness and leakage of unilateral EU climate policy: An assessment of policy instruments," Ecological Economics, Elsevier, vol. 128(C), pages 246-259.
    3. Li, He & Lu, Juan, 2021. "Can stable environmental protection officials’ tenure reduce illegal emissions?," Socio-Economic Planning Sciences, Elsevier, vol. 78(C).
    4. Weiming Lin & Jianling Chen & Jianbang Gan & Yongwu Dai, 2022. "Do Firms That Are Disadvantaged by Unilateral Climate Policy Receive Compensation? Evidence from China’s Energy-Saving Quota Policy," Sustainability, MDPI, vol. 14(22), pages 1-20, November.
    5. Jihad C. Elnaboulsi & Wassim Daher & Yiğit Sağlam, 2023. "Environmental taxation, information precision, and information sharing," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 25(2), pages 301-341, April.
    6. Tchorzewska, K.B. & Garcia-Quevedo, J. & Martinez-Ros, E., 2022. "The heterogeneous effects of environmental taxation on green technologies," Research Policy, Elsevier, vol. 51(7).
    7. Eirik S. Amundsen & Lars Gårn Hansen & Hans Jørgen Whitta-Jacobsen, 2022. "Regulation of Location-Specific Externalities from Small-Scale Polluters," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 82(3), pages 507-528, July.
    8. Jeddi, Samir & Lencz, Dominic & Wildgrube, Theresa, 2021. "Complementing carbon prices with Carbon Contracts for Difference in the presence of risk - When is it beneficial and when not?," EWI Working Papers 2021-9, Energiewirtschaftliches Institut an der Universitaet zu Koeln (EWI), revised 16 Aug 2022.

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    More about this item

    Keywords

    externalities; Pigouvian taxes; subsidies; regulation;
    All these keywords.

    JEL classification:

    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies

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