It is usually supposed that price control and quantity control are symmetrical in an environmental policy when there is no uncertainty. Thus, an emission charge is as effective as the trade of emission rights or entitlements as a tool for emission control. We show that the two instruments are asymmetrical under special technical conditions, even if there is no uncertainty: If there is an independent costly disposal process, whether it is a recycling process or an abatement process, in a constant-returns-to-scale economy, an emission charge cannot pinpoint a specific level of emissions whereas a quantity control such as trade of emission rights can do so, realizing the same value of emission charges as a shadow price or the price of emission rights.
ASJC Scopus subject areas
- Economics and Econometrics
- Management, Monitoring, Policy and Law