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...

The use of a constant discount rate to study long-lived environmental problems such as global warming has two disadvantages: The prescribed policy is sensitive to the discount rate, and with moderate discount rates, large future damages have almost no effect on current decisions. Time-consistent...