Environmental Policy

Question 1

The effect of carbon dioxide (and other emissions) on the environment

Answer 1

• Rising sea levels
• Increased frequency and severity of extreme weather events (Bushfire/droughts in Australia)
• Negative effects on health due to pollution

Question 2

Effect of carbon emissions on AS and living standards

Answer 2

The impacts of carbon emissions will reduce the productive capacity and the ability and willingness of businesses to produce in the Australian economy.
Can hurt both material and non-material living standards

Question 3

Safeguard Mechanism

Answer 3

Australia’s Safeguard Mechanism is a policy designed to limit greenhouse gas emissions from Australia’s largest polluters. It sets baseline emission levels for each facility, and if emissions exceed this baseline, the facility must offset the excess by purchasing carbon credits. The mechanism aims to ensure that emission reductions achieved through other government programs are not offset by increases in industrial emissions.

Under the plan, each year the total carbon emissions in Australia will be reduced by 4.9% each year.

Question 4

Impacts of the Safeguard Mechanism in the short-term

Answer 4

The ‘Safeguard Mechanism’ impacts Aggregate Supply in the short term by potentially increasing costs for businesses that exceed their emissions limits (as they will need to purchase additional offsets), which could reduce their production levels, leading to lower levels of AS.

Improved intertemporal efficiency as firms decrease emissions.

Question 5

Impacts of the Safeguard Mechanism in the Short-term on Living Standards

Answer 5

• Likely job losses in carbon-emitting industries like coal/gas mining and coal/gas-fired power plants.
• This will negatively affect material living standards
• Should improve non-material living standards as emission are reduced and the environment improves (also less stress and anxiety)

Question 6

Impacts of the Safeguard Mechanism in the Long-term

Answer 6

The ‘Safeguard Mechanism’ will impact AS in the long-term by encouraging businesses to invest in cleaner technologies and practices, which can lead to more sustainable and efficient production methods, thus increasing, overall, greener, AS.

Improves intertemporal efficiency by encouraging businesses to invest in sustainable practices now, which will benefit future generations by reducing environmental degradation. This will preserve resources for future generations.

Create jobs in ‘green industries’ (solar, wind, hydrogen)

Leads to an increase in MLS and NMLS.