In an investment contest for environmental policy, polluters and victims ofpollution invest in an increase of their marginal benefits of pollution and environmentalquality, respectively. These investments influence time-consistent environmental policy...

We analyze the design of optimal environmental policy when environmentaldamage is uncertain and investments in abatement technologies are irreversible. Weassume that the investment in the new abatement technology can be used for twoperiods and that the true extent of environmental damage will...

We study environmental policy for a polluting firmthat can invest in extracapacity. The optimal levels of allowed output as well as the tax rate are increasingin investment. With divisible investment, commitment always leads to the first best,under direct regulation and taxation. Time-consistent...