22-class notes - 10/30/2009 Today class 22 Monday Nov 2...

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10/30/2009 1 Today – class 22 – Monday Nov 2 • Environmental solutions: marketable permits – Exercise – auto emissions • Larry Summers – “Let them eat pollution” (course package – not on class website) Wed – Debate 1: Ban cell phones while driving Frid – Debate 2 : Replace PST with HST Mon – Nov 9 - Start International trade • Comparative and competitive advantage – Brander (8, pp 159-166) 6. Marketable permits Marketable permits are licences to emit a certain amount of pollution. The licenses can be bought and sold in a market. The government determines the total pollution or “cap” (eg total CO2 emissions) to be allowed based on environmental objectives. Referred to as a “hard target” or “hard cap” scheme. Soft-target or soft-cap: allow growth in pollution by only limiting the amount of pollution per unit of output (Canadian approach). • Assuming a “hard -cap” scheme, permits are issued until the total amount of pollution allowed by permits is equal to the “cap” on total pollution.
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10/30/2009 2 Permits are allocated free to firms 1. There is typically no charge for the initial allocation of marketable permits to firms (permits are free). Giving away permits makes the environmental scheme more acceptable to firms; governments may suffer a smaller reduction in support from business than if they impose a pollution tax. In some cases initial permits are auctioned off to firms making the permit scheme more like a pollution tax. For simplicity, we will consider pollution permits that are allocated free to firms. 2
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This note was uploaded on 02/14/2010 for the course COMM 296 taught by Professor Dasgupta during the Fall '08 term at The University of British Columbia.

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22-class notes - 10/30/2009 Today class 22 Monday Nov 2...

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