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...

We provide ex-post empirical analysis of the effects of climate policies on carbon dioxide emissions at the aggregate national level. Our results are based on a comprehensive database of 121 countries. As climate policies we examine carbon taxes and emissions trading systems (ETS), as well as...

This paper shows that, when the price of emission allowances is sufficiently high, emission trading schemes improve the emission efficiency of highly polluting firms. The efficiency gain comes from a relative decrease in emissions rather than a relative increase in operating revenue. Part of the...