presented-2012Nov-climate-envr200-handout

G 1 month firms bringing fossil fuels or etc into the

Info iconThis preview shows page 1. Sign up to view the full content.

View Full Document Right Arrow Icon
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: ntity is fixed • Government decides on a quota (maximum) of GHG emissions for the period (e.g. 1 month) • Firms bringing fossil fuels or etc into the economy bid on permits at an auction Examples: EU ETS, WCI, U.S.A. SO2 “Carbon” tax: Price is fixed • Government decides on a price that should be paid for emission of GHG gases • Firms bringing fossil fuels or etc into the economy buy permits at the fixed price Examples: Norway, Denmark, B.C., Australia Conclusion Introduction Scope of policy Planner’s problem Instruments Conclusion Criteria for comparison of carbon pricing policies risks (Weitzman 1974, Review of Economic Studies) • high risk in environmental costs? −→ Use quantity control • high risk in mitigation costs? −→ Use price control cost effectiveness incidence • who pays for polluting? • who suffers the damage? (e.g. hot-spots) • who gets the revenue / appropriates the capitalisation value? Introduction Scope of policy Planner’s problem Instruments Conclusion Back to evaluating choices. . . Definitions: Marginal cost of control, MCC e.g., the cost of mitigating one more t of CO2 Marginal cost of damage, MCD e.g., the cost of adapting to one more t of CO2 Introduction Scope of policy Planner’s problem Instruments Conclusion Review: when to use a tax? When a cap? • steep marginal cost of damage −→ Use a quantity control • steep marginal cost of control −→ Use a price control Introduction Scope of policy Planner’s problem Concept question 3 Which case is appropriate for GHGs? Instruments Conclusion Introduction Scope of policy Planner’s problem Instruments Conclusion Concept summary • Evaluation of alternatives: {Mitigation, . . . } • Mitigation planner’s problem: evaluation of actions : Steeper MCD : use a quantity control {(dis)investment, consumption shifts, . . . } • Implementation (policy design): : Steeper MCC : use a price control : Other Choice of instruments: {GHG pricing, . . . } • Design of GHG pricing: {Cap / auction / trade, tax, . . . } • Consideration of dynamic risks: costs of control vs damage...
View Full Document

This note was uploaded on 03/23/2014 for the course ENVR 200 taught by Professor Rhemtulla during the Fall '10 term at McGill.

Ask a homework question - tutors are online