lecture8 - Global Climate Change 1 2 Green Taxes are taxes...

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Global Climate Change 1. Green Taxes are taxes on environmental bads, such as pollution, carbon, sewage, etc. 2. These bads impose externalities on people (other than their producers), and these externalities are (by definition) not mediated by a price or a market. a. For example, when I emit particulates from the tailpipe of my car, it reduces the air quality for everybody, especially those living up the Fraser Valley. b. Those people are not able to i. Charge me for the ill-health that I cause them; ii. Or, pay me to not drive. c. A green tax undoes this missing market. i. By taxing, for example, my emissions, the government makes me act as if there were a market for people in Abbotsford to make me pay them for polluting. ii. If the green tax is set at the right level, then my behaviour will adjust so that I drive exactly as much as if I had to pay each and every resident of the Fraser Valley to compensate them for the damage that my driving does. iii.
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