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Lecture

ECON-260-Chapter11.pdf

11 Pages
174 Views

Department
Economics
Course Code
ECON 260
Professor
Chris Bidner

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Description
Econ 260 Chapter 12 Emission Taxes and Subsidies Taxes and subsidies are marketbased incentive policies because polluters pay a price per unit of emissionsThe quantity of emissions is determined by demand at that price by pollutersThe maximum willingness to pay for emissions by polluters is their marginal abatement costExample 1A tax on the carbon emissions from vehiclesPolluters will emit as long as the taxMAC or tuntil the taxMAC at E taxMAC a b tmax E EE Polluters pay the tax bill plus the abatement costs the total compliance costs which is ab1 Example 2 MAC5005E tax2050 20tax MACt E100Et 205005EtE60 Total compliancecosts206020400512004001600 What is the efficient level for the taxAt E where taxMDMAC Will firms prefer taxes or standards Standards because the total compliance costs are only TAC2
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