Abstract
This paper investigates the price vs quantity choice (taxes vs quotas) for multiple stock pollutants that can accumulate over time and interact mutually into abatement costs or environmental damages, when firms have private information. The analytic condition for favoring quotas over taxes was obtained for a case of symmetric pollutants and numerical simulations were conducted for the more general case. Moreover, an empirical application to global warming suggests that it is optimal for the regulator to choose a mixed policy that implements taxes on CO2 and quotas on methane.
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