Professor Ambec starts part 2 by discussing emission caps and emissions fees, illustrating how different firms would be affected depending on their marginal abatement costs.
He goes on discussing Cap-and-trade and how market mechanisms can affect abatement decisions.
Ambec also discusses ambient taxes which is a scheme that works with either fees and/or subsidies depending on the polluters impact. Thus each firms abatement decisions also depends on what other firms are doing. He presents some game theoretical experiments that have been performed on ambient taxes and their conclusions.