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9 Cards in this Set
- Front
- Back
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What is the intention of an emission tax? |
To incentivize polluters to find the best way to reduce emissions rather than have a central authority determine how to do so. It encourages polluters to pollute less. |
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What do we need to set the social efficient tax? |
Marginal abatement cost and marginal damage function |
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How are taxes transfer payments? |
Payments by polluters to public sector and society Transfer payments are NOT a social cost of the area --> polluter's total abatement costs |
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What are the net social benefits of a policy? |
Total damages forgone net of the social costs of compliance |
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How does the imposition of an emission tax satisfy the equimarginal principle? |
All polluters will set the tax equal to their MAC curve --> MAC curves equalized across all sources |
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When are emission tax NOT cost-effective? |
If regulator doesn't know about the marginal abatement costs of the sources |
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Emission Taxes vs Standards --> Enforcement costs --> Gov Revenue --> Distributional Impacts |
Taxes incentivize innovation Enforcement costs depend on basis on monitoring Taxes result in government revenue Tax will increase costs and be a regressive policy. But funds can be redistributed and give tax cuts to poor |
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What is an emission subsidy and how does it work? |
Rewards reducing emissions by acting as an opportunity cost |
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Distribution factor of taxes vs subsidies |
Subsidies must be funded by tax payers, instead of tax where polluter pays |
