3541567

5734

This paper investigates the implications of the materials balance for optimal environmental policy. We find that neglecting the materials–emissions relationship – as is common in models of optimal environmental regulation – implies biases, whose sign depends on the regulatory instrument chosen. When emissions are regulated through an emission tax, the seemingly optimal tax is too high. When regulation proceeds through the use of an emission standard, the seemingly optimal standard is too lax.

2454

Environmental Regulation , Emission tax , Emission standard , Materials balance

Studia Iranica

2460

2460