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Explain intuition behind why market-based instruments

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Questions

1. Explain the intuition behind why market-based instruments (emissions taxes and tradeable permits) are cost-effective, while uniform standards generally are not.

2. The Coase Theorem suggests that, under some conditions, private bargaining will resolve negative externalities. Does this mean that pollution problems should be left for the market to solve? Why or why not? Discuss this from the perspective of efficiency, as well as equity.

3. Why has the price of carbon dioxide emissions credits on the voluntary Chicago Climate Exchange been so much lower than the price of carbon dioxide emissions credits on the European Unions Emissions Trading System? What general conclusions can you draw from these contrasting examples?

4. How would a landing tax in a fishery work to reduce the amount of fish caught? Can you illustrate this effect in our graphical (mathematical) model of a fishery?

Reference no: EM133372945

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