Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/235287 
Title: 
Year of Publication: 
2021
Series/Report no.: 
CESifo Working Paper No. 8917
Publisher: 
Center for Economic Studies and Ifo Institute (CESifo), Munich
Abstract: 
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.
Subjects: 
pollution
climate change
taxes
quantities
regulation
smart cap
uncertainty
technology diffusion
dynamic programming
integrated assessment
DICE
JEL: 
Q00
Q50
H20
D80
Document Type: 
Working Paper
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