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Optimal level of emission reduction

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Reference no: EM131260106

Sometimes market activities (production, buying, and selling) have unintended positive or negative effects outside the market's scope, like pollution. These are called externalities.

Assume that you are a policy maker concerned with correcting the effects of gases and particulates emitted by a local power plant. Write a 1-page memo that addresses the following points:

  • Select 1 of the following policies from the following list that you think would best reduce emissions: Pigouvian taxes, emission taxes, or cap and trade. Explain it.
  • Why do you think your policy would work in reducing the total amount of emissions?
  • In your answer, explain the costs and the benefits of the production and consumption of the good, as well as the negative externality.
  • How would you decide what the best or optimal level of emission reduction would be? 

Format your answers as a memo with 1 page of written content. You may use bullet points, but please cite your sources. Include a reference list.

Reference no: EM131260106

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