Second Best Environmental Policies under Uncertainty

Antoniou, Fabio and Hatzipanayotou, Panos and Koundouri, Phoebe (2009): Second Best Environmental Policies under Uncertainty. Published in:

Abstract

We construct a strategic trade model of an international duopoly, whereby production by exporting firms generates a local pollutant. Governments use environmental policies, i.e., an emissions standard or a tax, to control pollution and for rent shifting purposes. Contrary to their firm, however, governments are unable to perfectly foresee the actual level of demand, the cost of abatement and the damage caused from pollution. Under these modes of uncertainty we derive sufficient conditions under which the governments optimally choose an emissions tax over an emissions standard.

• Item Type: MPRA Paper
• Language: English
• Keywords: Strategic Environmental Policy, Pollution, Choice of Policy Instrument, Uncertainty
• Subjects: C - Mathematical and Quantitative Methods > C0 - General; O - Economic Development, Innovation, Technological Change, and Growth > O2 - Development Planning and Policy > O20 - General; Y - Miscellaneous Categories > Y1 - Data: Tables and Charts

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