Preventing Environmental Disasters: Market-Based vs. Command-and-Control Policies

Preventing Environmental Disasters: Market-Based vs. Command-and-Control Policies, LEM Working Papers, 2015/34

26 Pages Posted: 1 Jan 2016 Last revised: 18 Mar 2016

Francesco Lamperti

Scuola Superiore Sant'Anna di Pisa - Institute of Economics and LEM; Fondazione Eni Enrico Mattei (FEEM)

Mauro Napoletano

Observatoire Français des Conjonctures Economiques (OFCE); SKEMA Business School; Scuola Superiore Sant'Anna di Pisa - Laboratory of Economics and Management (LEM)

Andrea Roventini

Scuola Superiore Sant'Anna di Pisa - Laboratory of Economics and Management (LEM); Observatoire Français des Conjonctures Economiques (OFCE)

Date Written: March 18, 2016

Abstract

The paper compares the effects of market-based and command-and-control climate policies on the direction of technical change and the prevention of environmental disasters. Drawing on the model proposed in Acemoglu et al. (2012), we show that market-based policies (carbon taxes and subsidies towards clean sectors) exhibit bounded window of opportunities: delays in their implementation make them completely ineffective both in redirecting technical change and in avoiding environmental catastrophes. On the contrary, we find that command-and-control interventions guarantee policy effectiveness irrespectively on the timing of their introduction. As command-and-control policies are always able to direct technical change toward "green" technologies and to prevent climate disasters, they constitute a valuable alternative to market-based interventions.

Keywords: Environmental Policy, Command and Control, Carbon Taxes, Disasters

JEL Classification: O33, O44, Q30, Q54, Q56, Q58

Suggested Citation

Lamperti, Francesco and Napoletano, Mauro and Roventini, Andrea, Preventing Environmental Disasters: Market-Based vs. Command-and-Control Policies (March 18, 2016). Preventing Environmental Disasters: Market-Based vs. Command-and-Control Policies, LEM Working Papers, 2015/34. Available at SSRN: https://ssrn.com/abstract=2709577 or http://dx.doi.org/10.2139/ssrn.2709577

Francesco Lamperti (Contact Author)

Scuola Superiore Sant'Anna di Pisa - Institute of Economics and LEM ( email )

Institute of Economics
Piazza Martiri della Liberta, n. 33
Pisa, Pisa 56127
Italy

Fondazione Eni Enrico Mattei (FEEM) ( email )

C.so Magenta 63
Milano, 20123
Italy

Mauro Napoletano

Observatoire Français des Conjonctures Economiques (OFCE) ( email )

60, rue Dostoïevski
Sophia-Antipolis Cedex, 06902
France

HOME PAGE: http://www.ofce.sciences-po.fr

SKEMA Business School ( email )

60 rue Dostoïevski
Sophia Antipolis, 06902
France

Scuola Superiore Sant'Anna di Pisa - Laboratory of Economics and Management (LEM) ( email )

Piazza Martiri della Liberta, 33
Pisa, I-56127
Italy

Andrea Roventini

Scuola Superiore Sant'Anna di Pisa - Laboratory of Economics and Management (LEM) ( email )

Piazza Martiri della Liberta', 33-I-56127
Pisa
Italy

Observatoire Français des Conjonctures Economiques (OFCE) ( email )

69 Quai d'Orsay
Paris 75004
France

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