In a market subject to environmental regulation, a firm's strategic behavior affects the production and emissions decisions of all firms. If firms are regulated by a Pigouvian tax, changing emissions will not affect the marginal cost of polluting. However, under a tradable permits system, the...

Carbon taxation is a widely proposed and in some countries already adopted means to limit anthropogenic climate change. This paper studies carbon taxation using an 18-region, 80- period overlapping generations model. We focus on carbon policy that delivers present and future mankind the highest...

Experiences in real-world pollution markets suggest that firms make persistent errors in forecasting allowance and credit prices that inform their investment decisions. The residual uncertainty characterizing allowance and credit trading means that pollution markets may fail to deliver...

This paper asserts that reporting of the ratio of welfare gains to tax revenue should be standard protocol in economic analyses of externality correcting taxes. That this comparison might matter is somewhat of a "blind spot" in most economic analyses, for it plays virtually no role when...

This paper posits the conceptually useful allegory of a futuristic "World Climate Assembly" that votes on global carbon emissions via the basic principle of majority rule. Two variants are considered. One is to vote on a universal price (or tax) that is internationally harmonized, but the...

Much of the air pollution currently regulated under U.S. emissions trading programs is non-uniformly mixed, meaning that health and environmental damages depend on the location and dispersion characteristics of the sources. Existing policy regimes ignore this fact. Emissions are penalized at a...

We assess the long-run dynamic implications of market-based regulation of carbon dioxide emissions in the US Portland cement industry. We consider several alternative policy designs, including mechanisms that use production subsidies to partially offset compliance costs and border tax...

We present a general equilibrium model of the decisions of firms to innovate and to engage in international trade. We use the model to analyze the impact of a reduction in international trade costs on firms' process and product innovative activity. We first show analytically that if all firms...

In a standard multi-sector, heterogeneous-firm trade model the effect of tariffs on entry, especially in the presence of production linkages, can reverse the traditional positive optimal-tariff argument. We construct and employ a new, large, disaggregated tariff dataset and then apply a...

This paper studies how gradualism affects the welfare gains from trade, technology, and reforms. When people face adjustment frictions, gradual shocks create less adverse distributional effects in the short run. We show that there are welfare gains from inducing a more gradual transition via...