John Foster has asked that I post a link to a paper he’s recently co-authored (pdf) arguing for a different carbon regulatory regime to promote carbon abatement. I’m travelling and unable to subject the paper to any analysis, but it looks interesting. I hope you’ll check it out. The abstract is as follows:
Whilst emissions trading systems are widely held to be able to deliver lowest-cost
abatement, uncertainty reduces their effectiveness. We consider a new scheme,
the Tender-Price Allocation Mechanism, which focuses carbon factor cost
expenditure on abatement rather than just revenue transfers. It is a scheme that
reduces uncertainty and the costs of uncertainty for both firms and regulators.
It also incorporates a suite of incentives that compensates for the externalities
associated with abatement investment.