Emissions taxes versus intensity standards: Second-best environmental policies with incomplete regulation. Holland, S. P. Journal of Environmental Economics and Management.
Emissions taxes versus intensity standards: Second-best environmental policies with incomplete regulation [link]Paper  doi  abstract   bibtex   
The best emissions tax or emissions cap may be an inferior instrument under incomplete regulation (leakage). Without leakage, an intensity standard (regulating emissions per unit of output) is inferior due to an implicit output subsidy. This inefficincy can be eliminated by an additional consumption tax. With leakage, an intensity standard can dominate the optimal emissions tax, since the implicit output subsidy prevents leakage. The addition of a consumption tax improves an intensity standard's efficiency, may prevent leakage, and may be efficient. Comparing intensity standards to output-based updating shows that the latter dominates if updating is sufficiently flexible.
@article{holland_emissions_????,
	title = {Emissions taxes versus intensity standards: {Second}-best environmental policies with incomplete regulation},
	issn = {0095-0696},
	shorttitle = {Emissions taxes versus intensity standards},
	url = {http://www.sciencedirect.com/science/article/pii/S0095069612000046?v=s5},
	doi = {10.1016/j.jeem.2011.12.002},
	abstract = {The best emissions tax or emissions cap may be an inferior instrument under incomplete regulation (leakage). Without leakage, an intensity standard (regulating emissions per unit of output) is inferior due to an implicit output subsidy. This inefficincy can be eliminated by an additional consumption tax. With leakage, an intensity standard can dominate the optimal emissions tax, since the implicit output subsidy prevents leakage. The addition of a consumption tax improves an intensity standard's efficiency, may prevent leakage, and may be efficient. Comparing intensity standards to output-based updating shows that the latter dominates if updating is sufficiently flexible.},
	urldate = {2012-02-03},
	journal = {Journal of Environmental Economics and Management},
	author = {Holland, Stephen P.},
	keywords = {Emissions taxes, Emissions trading, Externality, Incomplete regulation, Intensity standards, Leakage, Market power},
	file = {1-s2.0-S0095069612000046-main.pdf:files/36180/1-s2.0-S0095069612000046-main.pdf:application/pdf;science.pdf:files/34988/science.pdf:application/pdf}
}
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