This paper addresses optimal taxation, when the relationship between consumption and environmental damage is uncertain and treated as a random variable by policy makers. The main purpose is to analyze how additional uncertainty about this relationship affects the optimal unit tax on the...

Economic models of climate policy (or policies to combat other environmental problems) typically neglect psychological adaptation to changing life circumstances. People may adapt or become more sensitive, to different degrees, to a deteriorated environment. The present paper addresses these...

This paper addresses optimal taxation, when the relationship between consumption and environmental damage is uncertain and treated as a random variable by policy makers. The main purpose is to analyze how additional uncertainty about this relationship affects the optimal unit tax on the...