certain conditions, the optimal pollution tax is positive; otherwise, the tax reverts to a subsidy. Comparing mixed and …

under a hypothetical ambient subsidy mechanism. I use the two-step difference GMM estimator (Arellano-Bond) to show that, on …, I am able uncover the average abatement cost curve which then allows me to calculate the optimal ambient subsidy rates … for different levels of ambient pollution targets. I then compare the optimal subsidy rates with the estimated cost of …