The seminar was based on the paper "Prices vs Quantities with Multiple Pollutants".
The study extends Weitzman's Prices vs Quantities analysis to multiple pollutants. It examines the effects of the choice of policy mixes involving different combinations of price-based and quantity-based regulations when firms can reduce the emissions of two pollutants simultaneously through the use of multi-pollutant abatement technologies.
Photo by Fengjie Yu
The study finds that the technological externality between the abatement efforts involved is an important parameter that affects the choice of instruments when firms' abatement costs are private information. If pollutants are complements in the abatement efforts, a mix policy instrument with a tax on one pollutant and a quota on the other is sometimes preferable, even if the pollutants are identical in terms of benefits and costs of abatement. Instead, if they are substitutes, the mix policy is dominated by taxes or quotas.