Environmental regulators often have imperfect information about regulated firms' abatement costs. In this paper we compare taxes and emissions permits in a dynamic setting in which firms behave strategically. The regulator updates policy over time based upon previous aggregate industry...

We analyse two mechanism designs for refunding emission payments to polluting firms: output-based refunding (OBR) and expenditure-based refunding (EBR). In both instruments, emission fees are returned to the polluting industry, typically making the policy more politically acceptable than a...