We study the importance of uncertainty and public finance to the welfare ranking of three environmental policy instruments: pollution taxes, pollution permits and Kyoto-like numerical rules for emissions. The setup is the basic stochastic neoclassical growth model augmented with the assumptions...

We welfare rank different types of second-best environmental policy. The focus is on the roles of uncertainty and public finance. The setup is the basic stochastic neoclassical growth model augmented with the assumptions that pollution occurs as a by-product of output produced and environmental...

This paper studies the effect of climate policy uncertainty on firm polluting behavior. I find that firms reduce toxic emissions and close toxic facilities during the heightened climate policy uncertainty periods. Firms respond to climate policy uncertainty by adopting abatement technology to...

The effects of two environmental policy options for the reduction of pollution emissions, i.e. taxes and non-tradable quotas, are analyzed. In contrast to the prior literature this work endogenously takes into account the level of emissions before and after the adoption of the new environmental...

We develop a simple model of managing a system subject to pollution damage under risk of an abrupt and random jump in the damage coefficient. The model allows the full dynamic characterization of the optimal emission policies under uncertainty. The results, that imply prudent behavior due to...