Publications

Pricing Monitoring Uncertainty in Climate Policy

25 August 2016 - Special issues

This article assesses the environmental and economic efficiency of three different approaches to treat monitoring uncertainty in climate policy, namely prescribing uncertainty, setting minimum certainty thresholds and pricing uncertainty through a discount. Our model of the behavior of profit-maximizing agents demonstrates that under the simplest set of assumptions the regulator has no interest in reducing monitoring uncertainty. However, in the presence of information asymmetry, monitoring uncertainty may hamper the economic and environmental performance of climate policy due to adverse selection. In a mandatory policy, prescribing a reasonable level of uncertainty is preferable if the regulator has enough information to determine this level. For voluntary mechanisms, such as carbon offsets, allowing agents to set their own monitoring uncertainty below a maximum threshold or discounting carbon revenues in proportion to monitoring uncertainty are the best approaches for the regulator to mitigate the negative effects of information asymmetry. These conclusions are much more pronounced when agents do not accrue revenues from their mitigation action, other than carbon. Our analysis of monitoring uncertainty under information asymmetry, which results in heterogeneity in the agents’ benefits from abatement, generalizes the classical trade-off between production efficiency and information rents.

You can download the article HERE  

Pricing Monitoring Uncertainty in Climate Policy Download
To learn more
  • 09/29/2023 Foreword of the week
    Adaptation: plotting pathways is the next essential step

    As stated by the European Commission there is a “lack of preparedness and [a] disproportion between the climate threats and response mechanisms and structures in place”. One of the key factors in speeding up the implementation of adaptation actions will be the definition, in particular by public authorities, of « clear adaptation pathways setting up the process of how to achieve them through the sequence of options and actions ». The cost of these trajectories will also need to be quantified, to ensure that the human and financial resources are available for implementation.  For the time being, this work of defining adaptation trajectories is generally lacking, whatever the sector or scale. And the means to be deployed for adaptation are therefore unknown.

  • 09/20/2023 Hors série
    Climate: the risk of polarisation – Annual Report 2023

    I4CE produit des expertises innovantes afin d’informer les débats sur les politiques publiques pour la transition climatique. Mais nous ne faisons pas qu’écrire des rapports, nous voulons avoir de l’impact. Nous allons au contact des décideurs, des médias, des parties prenantes pour apprendre d’eux et faire que ces politiques progressent, concrètement. Nous vous invitons, en parcourant notre rapport d’activité, à découvrir les débats qui intéressent I4CE, les changements majeurs de politique publique des douze derniers mois et comment nous y avons contribués.

  • 09/15/2023 Foreword of the week
    From denial to acceptance: Europe’s next step in the cleantech race

    Psychologists sometimes talk about the five stages of grief: denial, anger, bargaining, depression, and acceptance. One year on from the announcement of the US Inflation Reduction Act (IRA), the European response has looked startlingly similar. Public anger in Brussels at perceived American protectionism. Private sector depression at the prospect of Europe falling behind in the global cleantech race. Denial of the gap between the EU and US efforts, by arguing that that all EU and national spending on cleantech amounts to a conservative estimate of what the IRA offers (while not factoring in the full range of US support). 

See all publications
Press contact Amélie FRITZ Head of Communication and press relations Email
Subscribe to our mailing list :
I register !
Subscribe to our newsletter
Once a week, receive all the information on climate economics
I register !
Fermer