Discussion Papers no. 677

Technology choice, uncertainty and welfare

Prices vs. quantities

his paper shows that tradable emissions permits and an emissions tax affect the firms' technology choice differently under uncertainty. A tax encourages the most flexible technology if and only if stochastic costs and the equilibrium permit price have sufficiently strong positive covariance, compared with the variance in consumer demand for the good produced. Moreover, the firms' technology choices are socially optimal under tradable emissions permits, but not under an emissions tax. Hence, modeling endogenous technology choice provides an argument in favor of tradable emissions permits as compared with emissions taxes.

Om publikasjonen

Tittel

Prices vs. quantities. Technology choice, uncertainty and welfare

Ansvarlig

Halvor Briseid Storrøsten

Serie og -nummer

Discussion Papers no. 677

Utgiver

Statistics Norway

Emne

Discussion Papers

ISSN

1892-753X

Antall sider

43

Målform

Engelsk

Om Discussion Papers

Discussion papers comprise research papers intended for international journals and books. A preprint of a Discussion Paper may be longer and more elaborate than a standard journal article as it may include intermediate calculations, background material etc.

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