The Informational Role of Emission Markets: Prices vs Quantities with Dispersed Information About Externalities

Key Points

• Prices in emission markets convey essential information about externalities, affecting decision-making processes.
• With dispersed information, quantities also play a crucial role in how externalities are perceived and managed.
• Observational analysis reveals the interplay between prices and quantities in shaping market responses to externalities.
• Understanding these relationships can guide better policy frameworks for emission reduction efforts.