We compare taxes and quotas when firms and the regulator have asymmetric information about abatement costs. Damages are caused by a stock pollutant. Uncertainty enters multiplicatively, i.e. it affects the slope rather than the intercept of abatement costs. We calibrate the model using cost and...

Non-strategic firms with rational expectations make investment and emissions decisions. The investment rule depends on firms' beliefs about future emissions policies. We compare emissions taxes and quotas when the (strategic) regulator and (nonstrategic) firms have asymmetric information about...