Steering the European transport greenhouse gas emissions under uncertainty.

This paper addresses how to regulate greenhouse gas emissions from the transport sector when abatement costs are uncertain. In an EU context, it is shown that a combination of a cap-and-trade system and emission taxes is preferable as it minimises the expected efficiency loss. The optimal design will depend on the relative cost structure within and outside the transport sector. It is argued that the optimal regime for the transport sector has similarities, but is not identical to, a pure emissions tax.