Pigou Regulation under Delayed Uncertainty Resolution - INRAE - Institut national de recherche pour l’agriculture, l’alimentation et l’environnement
Conference Papers Year : 2023

Pigou Regulation under Delayed Uncertainty Resolution

Abstract

We analyze the regulation of an externality with risky social cost whose level becomes known only after a delay. For three models - one-period consumption, one-period production, and two-period consumption-saving -, we show that the full-information equilibrium, that accounts for the realized social cost, is always associated with a positive social value of information as compared to purely ex-ante Pigou regulation. We discuss ways to capture part of this social value by designing policies with state-contingent ex-post taxes or ex-post transfers. We compare those designs for different policy instruments, including taxes and tradable permits. The paper contributes to the debate on the acceptability of environmental policy in the face of aggregate risk.
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Dates and versions

hal-04356714 , version 1 (20-12-2023)

Identifiers

  • HAL Id : hal-04356714 , version 1

Cite

Christoph Heinzel, Arnaud Reynaud. Pigou Regulation under Delayed Uncertainty Resolution. Workshop on Economics and Psychology of Climate Policy, iRisk; IESEG, Nov 2023, Lille, France. ⟨hal-04356714⟩
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