It is widely believed that an environmental tax (price regulation) and cap-and-trade (quantity regulation) are equally efficient in controlling pollution when there is no uncertainty. We show that this is not the case if some consumers (firms, local governments) are morally concerned about...

It is widely believed that an environmental tax (price regulation) and cap-and-trade (quantity regulation) are equally efficient in controlling pollution when there is no uncertainty. We show that this is not the case if some consumers (firms, local governments) are morally concerned about...

Consumers are influenced, not only by prices, but also by how those prices are labelled, and by the policies that undergird those prices. Steps to limit carbon emissions, including putting a “price” or a “limit” on emissions, can be undertaken in a variety of ways, and these policies are...