CLIMATE POLICY Flashcards
What is Command and Control Regulation? And 2 types?
“created by a govt body, in order to enter the market you need to do this” Technology-based standard Performance-based standard
Examples of Command and Control Regulation both types.
Technology-based standard Performance-based standard Catalytic converter MPG, energy efficiency standards for appliances
Advantages and disadvantages of Command and Control.
Environmental advantages but could be costly and hard to monitor
What are Market Based Regulations? How do they work?
They try to utilize market signals and incentives in order to achieve certain goals
- Carbon tax
- Tax breaks
- Incentivizing renewable energy generation
Rank all from least to most efficient. Why are these ranked the way they are?
Least: technology-based standards because companies are not allowed to make decisions in their better cost. Performance-based standards giving companies the opportunity of deciding which methods fit them better are more efficient. Most efficient= market-based regulations
Know the basics of a Cap and Trade program.
Govt establishes a cap in overall emissions below current level, making them scarce, they issue permits to emit exactly equivalent their cap. Companies have to have a permit in order to be able to emit and depending their costs, they would decide to either sell their permits or acquire more.
What are the buying and selling decision rules for permits?
Is it cheaper to buy a permit or to reduce production?
What are the design principles of a C&T? Know each and basic description.
* In what extension we want to reduce emissions
* Who is participating
Who gets them initially and how many
should be equally distributed or depending the company size
Why is a C&T better than Command and Control Reg?
Because we can achieve the same reduction goal more efficiently in costs.
it fits better for companies with low abatement cost
What is one environmental justice issue with Cap and trade
Environmental justice [in carbon taxing] would also require policies to make sure that carbon pricing doesn’t perpetuate toxic “hot spots” in poor communities as companies look for least-cost ways to deal with the new reality
How does a carbon tax work?
Implementing a tax in order to increase price associated with those fuel sources and when prices go up people would consume less making other forms of energy more competitive.
Explain a carbon tax impact on different energy sources.
More impact for fossil fuels than natural gas
What are design considerations of a carbon tax?
- Tax rate - Revenue direction (education, energy infrastructure investments) - Nationally applied rather than by states
What are some social justice issues with a carbon tax?
It’s regressive because it disproportionally affects the poor
How could those be alleviated?
Directing part of the potential carbon tax revenue creating new programs or supporting existing ones (food stamps)
What are the advantages and disadvantages of a C&T and a carbon tax?
Advantage C&P: certainty of reducing emissions
Disadvantage of C&T: difficult to monitor
Advantage Carbon Tax: more revenue to fund programs
Disadvantage of carbon tax: politically difficult to implement, People do not like taxes.
What is the Social Cost of Carbon (SCC)? Why is it estimated?
It attempts to quantify externalities associated with carbon emissions in order to establish what if the most efficient carbon tax to implement
What is Nordhaus’ criticism of Stern?
Dramatically different outcomes associated with different discount rates Sterns discount rate is dramatically low
What is the discount rate? What role does this discount rate play in calculating the SCC?
The rate at which you discount future costs or benefits of acquiring capital Using net present value calculations in order to decide to buy it or not. The value of the cost inquired today would be lower in the future considering inflation and depreciation. If it costs us more than 2.5 B today that means the cost don’t outweigh the benifts (considering sterns 6%) The higher discount rate the greater we are discounting future benefits with dealing with climate change today.
