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Emission Prices and Fees

Emission Prices and Fees - Emission Prices and Fees Ariel...

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Emission Prices and Fees Ariel Singerman November 2, 2010
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Economic solutions to environmental problems Markets fail to provide efficient amount of pollution on their own Policymakers can put to work incentives to correct it Simplest way of correcting the problem: put price on pollution ( market approach ) head2right First proposed by Arthur Pigouin early 20 th century head2right Aimed at bringing external costs back into the decision making of firms and consumers head2right Agents will adjust their optimizing behavior to the new market conditions
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Pigovianfees An emission fee is a price paid by a polluter to a regulatory entity for every unit of emissions the polluter emits Once pollution has a price polluter no longer ignores pollution forces polluter to confront the effect of its environmental damages (i.e.: consider them as part of its production costs) When faced with an emission fee (added cost) firms can either: a. Continue polluting and pay charge, or will choose whichever b. Invest in abatement and lower tax burden
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