Choosing appropriate policy instruments is an important part of successful regulation. Once objectives are agreed and suitable targets adopted, policy-makers can employ command-and-control regulation and/or economic instruments, and choose between fixing a price or a quantity. This paper examines the relative advantages of price, quantity and hybrid instruments according to: their efficiency under uncertainty; the trade-off between credible commitment and flexibility; implementation; international considerations; and political economy. Various illustrations of the theory are provided, with two detailed applications to climate change and transport policy, specifically congestion and ‘safety pricing’.
- prices vs quantities,
- climate change,
- emissions trading,
- carbon tax
Available at: http://works.bepress.com/hepburn/7/