Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/192846
Authors: 
Storrøsten, Halvor Briseid
Year of Publication: 
2017
Series/Report no.: 
Discussion Papers 864
Abstract: 
This paper examines regulation in the presence of adjustment costs and resource scarcity, allowing for imperfectly informed firms. I find strong evidence that announcement of future environmental regulation will reduce current emissions in the combined presence of resource scarcity and adjustment costs. This contrasts with the results in the literature on the green paradox. Further, efficient transition towards a low emission economy requires an investment tax on emission intensive production, unless firms have perfect information about the future. Moreover, investments in clean substitutes should first receive a subsidy, but may thereafter be taxed. The optimal tax on production differs from the Pigouvian tax in the case of scarce resources. Last, a uniform tax across heterogeneous agents can induce the socially optimal outcome only if firms have equal expectations about the future.
Subjects: 
regulation
adjustment cost
imperfect information
exhaustible resources
climate change
JEL: 
H21
H23
Q35
Q41
Q54
Document Type: 
Working Paper
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