A small open economy produces a consumer good along with green and black energy and imports fossil fuel for black-energy production at an uncertain world market price. Efficient risk management requires curbing fuel consumption, and hence carbon emissions, when consumers are prudent. Moreover,...

A small open economy produces a consumer good, green and black energy, and imports fossil fuel at an uncertain price. Unregulated competitive markets are shown to be inefficient. The implied market failures are due to the agents' attitudes toward risk, to risk shifting and the uniform price for...

Using a general equilibrium model where material is first extracted, then used for producing a consumption good, recycled and finally treated to reduce environmental damage, we study efficiency-restoring policies, when one or more of the constituent markets are inactive. The material is modeled...