Smart Cap

Arbeitspapier

We introduce a “smart” cap and trade system that eliminates the welfare costs of asymmetric information (“uncertainty”). This cap responds endogenously to technology or macroeconomic shocks, relying on the market price of certificates to aggregate information. It allows policy makers to modify existing institutions to achieve more efficient emission reductions. The paper also shows that the efficient carbon price is more sensitive to technological innovations than usually assumed. The lasting impact and slow diffusion of these innovations typically make the optimal carbon price a much steeper function of emissions than suggested by the social cost of carbon.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: CESifo Working Paper ; No. 8917

Classification and Topics

• Classification: Wirtschaft ; Agricultural and Natural Resource Economics; Environmental and Ecological Economics: General ; Environmental Economics: General ; Taxation, Subsidies, and Revenue: General ; Information, Knowledge, and Uncertainty: General
• Subject: pollution ; climate change ; taxes ; quantities ; regulation ; smart cap ; uncertainty ; technology diffusion ; dynamic programming ; integrated assessment ; DICE

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Karp, Larry S. ; Träger, Christian
• Event: Veröffentlichung
• (who): Center for Economic Studies and Ifo Institute (CESifo)
• (where): Munich
• (when): 2021

Further information

• Handle: http://hdl.handle.net/10419/235287
• Last update: 10.03.2025, 11:43 AM CET