Environmental market failure Flashcards
1
Q
What is the tragedy of the commons?
A
Where individuals, acting in their self interest, overuse a shared resource with the result that its depleted and degraded.
2
Q
What is a pollution permit in the carbon industry?
A
The government gives a permit to a firm of how much carbon emissions they can legally produce (can be sold to other firms)
3
Q
What is the diagram for pollution permits (primary market)?
A
-Perfectly inelastic S and S1 (shift right)
-because supply is unresponsive to a change in price
4
Q
Evaluation for the use of pollution permits?
A
-imperfect information (hard to quantify)
-impact on international competitiveness
-may shift production to developing countries
-cost to monitor scheme
-PeD
