- With no uncertainty, a tax is equivalent to an equally stringent cap-and-trade program
- In a seminal paper, Marty Weitzman demonstrated that the two are not equivalent if costs are uncertain, but are equivalent if only benefits are uncertain.
- The "Weitzman" rule says that if MB is steeper than MC, a quantity instrument will be preferred; and if MC is steeper than MB, a price instrument will be preferred. Instruments can be made identical when there is no uncertainty.
- Discuss which one is best if there is uncertainty.
- Categorizing pollutants -- stock vs flow; uniformly mixing vs not
- Hot spots and environmental justice.
KO 162-166, ch 10