Class Notes (923,443)
US (356,402)
Berkeley (8,464)
EPS (137)
EPS 7 (13)
Lecture 36

EPS 7 Lecture 36: 36. Carbon tax- The simple policy solution

2 Pages
54 Views

Department
Earth And Planetary Science
Course Code
EPS 7
Professor
David Romps

This preview shows half of the first page. Sign up to view the full 2 pages of the document.
Lecture 36
Carbon tax: government sets the prices of CO2 emissions and the market sets the
amount of CO2 emissions
Government price ($/tC) --market--> total emissions (tC/year)
Carbon tax: The simple policy solution
How it works
- The government taxes fossil fuels, either as burned or as they are pulled out of
the ground or brought into the country.
- That extra cost is passed on to subsequent products (e.g., coal-powered
electricity, gas heating, oil-deprived gasoline).
- Faced with these higher costs, businesses switch to using the cheaper
renewable
Cap and trade: government sets the amount of CO2 emissions, and the market sets
the price of CO2 emissions
Government total emissions (tC/year) market price ($/tC)
Cap and trade: how it works
- The year’s number of emissions permits (1 permit per 1 tC) is fixed by the
government
- At the end of the year, each polluter must have enough permits to cover all of
their emissions
- Polluters buy and sell permits to make sure they have enough to cover their
emissions
- The cost of the permits is passed on to subsequent products, and businesses
switch
Who sets the price?
Who gets the money?
Everyone
- Citizens’ Climate Lobby (CCL) advocates a carbon fee and dividend, which is
a carbon tax that returns all proceeds to households
- Advisory board: James Hansen, George Shultz
Victims
- The victims of global warming are future generations
1) Adaptation
2) Mitigation
Polluters
- Tax companies in proportion to their current emissions and pay companies in
proportion to their past emissions
ABC Co. historically emits 3tC/ year
Imagine that the carbon tax is $1 / tC
ABC Co. gets paid 1$ for each tC of
historical emissions and gets charged 1$
for each tC of current emission
Year 1: emits 3tC/ year
ABC Co. loses nothing
Year 2: emits 4 tC/ year
ABC Co. loses $1
Year three emits 2 tC/ year
ABC Co. earns $1
DEF Co. forms after the carbon tax has
begun
It has 0 tC/ year of historical emissions
Assume, as before, that the carbon tax is
$1/ tC
ABC Co. emits 3 tC year
ABC Co. loses nothing
DEF Co. emits 3t C/ year
DEF Co. loses $3

Loved by over 2.2 million students

Over 90% improved by at least one letter grade.

Leah — University of Toronto

OneClass has been such a huge help in my studies at UofT especially since I am a transfer student. OneClass is the study buddy I never had before and definitely gives me the extra push to get from a B to an A!

Leah — University of Toronto
Saarim — University of Michigan

Balancing social life With academics can be difficult, that is why I'm so glad that OneClass is out there where I can find the top notes for all of my classes. Now I can be the all-star student I want to be.

Saarim — University of Michigan
Jenna — University of Wisconsin

As a college student living on a college budget, I love how easy it is to earn gift cards just by submitting my notes.

Jenna — University of Wisconsin
Anne — University of California

OneClass has allowed me to catch up with my most difficult course! #lifesaver

Anne — University of California
Description
Lecture 36 Carbon tax: government sets the prices of CO2 emissions and the market sets the amount of CO2 emissions Government price (tC) market> total emissions (tCyear) Carbon tax: The simple policy solution How it works The government taxes fossil fuels, either as burned or as they are pulled out of the ground or brought into the country. That extra cost is passed on to subsequent products (e.g., coalpowered electricity, gas heating, oildeprived gasoline). Faced with these higher costs, businesses switch to using the cheaper renewable Cap and trade: government sets the amount of CO2 emissions, and the market sets the price of CO2 emissions Government total emissions (tCyear) market price (tC) Cap and trade: how it works The years number of emissions permits (1 permit per 1 tC) is fixed by the government At the end of the year, each polluter must have enough permits to cover all of their emissions Polluters buy and sell permits to make sure they have enough to cover their emissions The cost of the permits is passed on to subsequent products, and businesses switch Who sets the price? Who gets the money? Everyone Citizens Climate Lobby (CCL) advocates a carbon fee and dividend, which is a carbon tax that returns all proceeds to households Advisory board: James Hansen, George Shultz Victims The victims of global warming are future generations 1) Adaptation 2) Mitigation Polluters Tax companies in proportion to their current emissions and pay companies in proportion to their past emissions ABC Co. historically emits 3tC year DEF Co. forms after the carbon tax has Imagine that the carbon tax is 1 tC begun ABC Co. gets paid 1 for each tC of It has 0 tC year of historical emissions historical emissions and gets charged 1 Assume, as before, that the carbon tax is for each tC of current emission 1 tC Year 1: emits 3tC year ABC Co. emits 3 tC year ABC Co. loses nothing ABC Co. loses nothing Year 2: emits 4 tC year DEF Co. emits 3t C year ABC Co. loses 1 DEF Co. loses 3 Year three emits 2 tC year ABC Co. earns 1
More Less
Unlock Document

Only half of the first page are available for preview. Some parts have been intentionally blurred.

Unlock Document
You're Reading a Preview

Unlock to view full version

Unlock Document

Log In


OR

Don't have an account?

Join OneClass

Access over 10 million pages of study
documents for 1.3 million courses.

Sign up

Join to view


OR

By registering, I agree to the Terms and Privacy Policies
Already have an account?
Just a few more details

So we can recommend you notes for your school.

Reset Password

Please enter below the email address you registered with and we will send you a link to reset your password.

Add your courses

Get notes from the top students in your class.


Submit