Chapter 12 - Incentive-based Strategies

Question 1

What does IB stand for?

Answer 1

Incentive-based

Question 2

How do IB plans operate?

Answer 2

By having public authorities first set overall objectives and rules and leaving firms enough latitude that their normal commercial incentives will lead to the adoption of cost-effective pollution-control

Question 3

What are the two types of incentive policies?

Answer 3

1. Charges (taxes) and subsidies
2. Market-based systems

Question 4

What is the most straightforward approach to controlling emissions?

Answer 4

For authorities to charge a price for emissions.

Question 5

What are two ways in which authorities charge a price for emissions?

Answer 5

1. Charging for each unit of emission
2. Giving a subsidy for each unit of emission

Question 6

What are emission charges AKA?

Answer 6

Emission Taxes

Question 7

What do market-based incentives do?

Answer 7

They provide an incentive for the polluter to find the best way to reduce emissions, rather than have a central authority determine how it should be done.

Question 8

What are the two types of Carbon Tax?

Answer 8

1. Consumer
2. Industrial

Question 9

Define a Flat Tax Rate:

Answer 9

Tax bill exceeds remaining damage

Question 10

Define a Two-part tax:

Answer 10

Allow initial E1 < E* level of emission free of tax

Question 11

Equi-marginal principle automatically __________ by flat tax rate

Answer 11

satisfied

Question 12

True or false: Pollution tax revenue can be used to reduce other distortionary taxes

Answer 12

True

Question 13

What are three downfalls of Enforcement Costs?

Answer 13

1. Rely on self-reporting
2. Difficult for non-point source pollutants
3. Diffuse nature of agricultural waste difficult to measure