Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/185529
Authors: 
Karp, Larry S.
Traeger, Christian P.
Year of Publication: 
2018
Series/Report no.: 
CESifo Working Paper No. 7331
Abstract: 
“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 trade. Weitzman models a flow pollutant, but greenhouse gases are persistent. Stock pollutants require a fundamental change in the ranking criterion. Innovations’ persistence and their gradual diffusion both favor the use of cap and trade. Numerical results show that the case for cap and trade as a means of reducing greenhouse gas emissions is stronger than widely believed.
Subjects: 
policy instruments
pollution
climate change
taxes
quantities
regulation
uncertainty
cap and trade
technology
JEL: 
Q00
Q50
H20
D80
Document Type: 
Working Paper

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