Prices vs quantities: The role of commitment

Abstract:
Two central elements in the design of climate change policy are (i) the need to stimulate the development of clean technologies and (ii) governments' temptation to revise policies as new information (including the availability of cleaner technologies) flows in. Prices (i.e., pollution taxes) perform better than quantities (i.e., tradable quotas) when governments can commit to future policies. But taxes are also much more effective ex-post in expropriating inventors' rents and diffusing the new technology. For this very reason, taxes perform much worse in the absence of commitment. Permits coupled with subsidies to firms adopting the clean technology solve both problems: keep rents to inventors and make sure the new technology is widely diffused. Extensions that allow for private information and uncertainty are also discussed.

Juan Pablo Montero, académico del Departamento de Economía de la Pontificia Universidad Católica de Chile.

13:00 - 14:30 Los asistentes que se hayan inscrito compartirán un almuerzo liviando previo a la charla "Prices vs quantities: The role of commitment" dictada por Juan Pablo Montero, académico del ISCI.