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"Prices versus quantities" (Weitzman 1974), a hugely influential paper, is widely cited (and taught) in current debates about the best policy to reduce greenhouse gas emissions. The paper's criterion for ranking policies suggests that technological uncertainty favors taxes over cap and trade....
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We develop a 2-period emission trading model for a stock pollutant with demand shocks resolving over time. We find precise conditions for efficiency of a stabilization mechanism where cumulative available permits decrease with excess supply in early periods. Our model describes the stabilization...
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and enforcement. Our key findings are: (1) prudential regulation limits expansion of plants with high initial pollution … regulated due to its historically large contribution to air and water pollution. Our paper contributes to the broader empirical … literature on the Porter Hypothesis, which posits a positive relationship between environmental regulation and "green" TFP growth …
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