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...

After twenty years of global negotiations, the world is still far from a comprehensive climate agreement. The "top-down" approach embodied by the Kyoto Protocol has all but stalled, chiefly due to disagreements over levels of ambition and objections to financial transfers. To avoid those...