We study a model in which the level of environmental regulation depends on abatement costs, which depend on aggregate levels of investment in abatement capital. Firms are non-strategic. When emissions quotas are not tradable, there are multiple competitive equilibria to the investment problem....

This paper examines the prices versus quantities issue, originally raised by Weitzman [8], in the context of carbon dioxide emissions and with a special focus on electricity generation. Within a simplified model of the electricity market, in which we explicitly allow for a monopolistic gas...

This paper examines the prices versus quantities issue, originally raised by Weitzman [8], in the context of carbon dioxide emissions and with a special focus on electricity generation. Within a simpli ed model of the electricity market, in which we explicitly allow for a monopolistic gas...

We show how corrective taxation can improve the efficiency properties of tradable quotas systems affected by market power. Indeed, when only a subset of firms are price takers while the remaining firms enjoy market power, we show that, if the regulator sets an ad hoc taxation on firms' traded...

The combination of emissions trading and emissions taxes is usually rejected as redundant or inefficient. This conclusion is based on the restrictive assumption that both policies are exclusively meant to control pollution. However, particularly taxes may pursue a variety of other policy...

We ask whether regulation can usefully supplement litigation in a model of optimal social control of harmful externalities. In our model, firms choose activity levels in addition to precautions. In contrast to the usual analysis, we assume that social returns to activity are higher than private...

We analyze how different ways of allocating emission quotas may influence the electricity market. Using a large-scale numerical model of the Western European energy market, we show that different allocation mechanisms can have very different effects on the electricity market, even if the total...

Concerns about adverse impacts on domestic energy-intensive and trade-exposed (EITE) industries are at the fore of the political debate about unilateral climate policies. Tariffs on the carbon embodied in imported goods from countries without emission pricing appeal as a measure to reduce carbon...

When faced with making economic trade-offs between lower upfront purchase costs and lower operating costs, many consumers experience “capital bias”, a phenomenon that is tantamount to discounting future costs excessively. Consumers may therefore end up with investments that are sub-optimal...