Emission Tax

Question 1

Category of policy instruments; market based incentives

Answer 1

Influence choices by altering relative prices /costs of various behavioural options

Question 2

Tax

Answer 2

Increases relative cost of behaviour

Question 3

Subsidy

Answer 3

Decreases The relative lost of a behaviour

Question 4

Emission tax

Answer 4

Fee paid by polluter for each unit of the pollutant emitted, places no limit on amount of emissions

Question 5

Implication ot emission tax

Answer 5

The polluter will choose to emit all units for which The tax is cheaper than marginal abatement cost, and then abate all units for which The tax exceeds marginal abatement cost

Question 6

Performance of emissions tax

Answer 6

Lower effectiveness: unlikely to achieve goal because does not explicitly limit emissions behaviour , typically cost effective (satisfy equimarginal principle with or without goal achievement)