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...

The most cost-effective policies for achieving CO2 abatement (e.g., carbon taxes) fail to get off the ground politically because of unacceptable distributional consequences. This paper explores CO2 abatement policies designed to address distributional concerns. Using an intertemporal numerical...