Env. & Dev. Econ. Research SeminarPrices vs. Quantities with Multiple CountriesTorben Mideksa
13. November 2019
Abstract: What is the best policy for mitigating climate change and managing other multilateral public goods? To answer this question, this paper examines a policy-making game among several countries in the face of cost uncertainty. Governments choose both the intensity of a policy (i.e., price level or quantity level) and the type of policy: price or quantity (e.g., carbon tax or emissions quota). When cost shocks are country-specific, this paper shows that countries tend to choose the price instrument despite the quantity instrument being superior from a welfare perspective. If cost shocks are world-wide, global carbon taxes are inefficient unless the ratio of the slope of the marginal abatement cost function to the slope of the marginal benefit function exceeds 80,000. Strikingly, the paper shows that the social welfare from non-cooperatively chosen quantities (e.g., emissions quotas) may dwarf the social welfare from first-best price levels (e.g., carbon taxes).
Zeit: 12:15 - 13.45 Uhr
Raum: 0079 VMP 5