We study the optimal quota sequence, in a stationary environment, where a regulator and a non-strategic firm have asymmetric information. The regulator is able to learn about the unknown cost parameter by using a quota that is slack with positive probability. It is never optimal for the...

We study a model in which the level of environmental regulation depends on abatement costs, which depend on aggregate levels of investment in abatement capital. Firms are non-strategic. When emissions quotas are not tradable, there are multiple competitive equilibria to the investment problem....

“Prices versus quantities” (Weitzman 1974), a hugely influential paper, is widely cited (and taught) in current debates about the best policy to reduce greenhouse gas emissions. The paper’s criterion for ranking policies suggests that technological uncertainty favors taxes over cap and...