We study the impact of emissions tax and emissions cap-and-trade regulation on a firm's technology choice and capacity decisions. We show that emissions price uncertainty under cap-and-trade results in greater expected profit than a constant emissions price under an emissions tax, which...

Emissions regulation today is non-uniform, with some regions imposing carbon costs within their borders while many others do not. This gives rise to concerns over carbon leakage ― offshoring and foreign entry in response to regional asymmetry in carbon costs. It is widely believed that carbon...