ENVIRON 157 Chapter Notes - Chapter N/A: Specific Performance, Paris Agreement, Market Failure
Document Summary
Compared to traditional command-and-control regulations, market-based policies can more cost- effectively reduce greenhouse gas (ghg) emissions by creating financial incentives for ghg emitters to emit less. Ten u. s. states and many jurisdictions outside the united states have established market- based programs to reduce ghgs. This is an example of an economic externality a consequence or side effect of an action that is not experienced by the individual or entity from which it originates, and that is not reflected in prices. Because polluters do not have to account for the costs associated with the damages that greenhouse gases create, society produces and consumes too many pollution-creating products (like fossil fuels) resulting in additional ghg emissions being put into the atmosphere. When firms explicitly see and must pay for the societal cost of pollution, they are able to determine how best to meet an environmental objective.