We introduce a "smart" cap and trade system that eliminates the welfare costs of asymmetric information (“uncertainty”). This cap responds endogenously to technology or macroeconomic shocks, relying on the market price of certificates to aggregate information. It allows policy makers to...

"Prices versus quantities" (Weitzman 1974), a hugely influential paper, is widely cited (and taught) in current debates about the best policy to reduce greenhouse gas emissions. The paper's criterion for ranking policies suggests that technological uncertainty favors taxes over cap and trade....

Debate about the relationship between environmental limits and economic growth has been taking place for several decades. These arguments have re-emerged with greater intensity following advances in the understanding of the economics of climate change, increases in resource and oil prices and...

A regulator anticipates learning about the relation between environmental stocks and economic damages. For a model with linear-quadratic costs and a general learning process, we show analytically that anticipated learning decreases the optimal level of abatement "at a given information set." If...