Question

QUESTION 10 The Australian Government is aiming to reduce Australia's carbon emissions to 5% below 2000 emissions levels by 2020 Reforms change | 10% increase | No change | 596 10% reduction Emissions (compared to 2000 levels) by 2020 Total cost for industries to 0 introduce measures (billions of dollars) reduction 0.3 1.2 1.5 reform a. One possible solution to reduce carbon emissions would be to make the marginal private cost of carbon emissions more closely reflect the marginal social cost. This would be achieved by the Government company Tax, P for increasing Personal tax, C for introducing a tax on Carborn emissions or B for Building more power stations lypeT for increasing b. Imagine the Government decided to implement a system using market based instruments to price carbon pollution. Firms would have to buy the right to produce emissions that exceeded levels in 2000. What is the minimum total cost of introducing the instruments to reduce emissions to achieve the goal (in billions of dollars to one decimal place)? billion C. If the Government decided to force firms to shut down if they exceeded their pollution limits, would this be efficient? Type Y for Yes or N for No

Answer 1

Ans a. C . By introducing a tax on carbon emission, the government can reduce carbon emission level.

Ans b. $2.5 billion.

Ans C. Y. If the government forcefully shuts down the firms which exceeds the pollution limits, it would be efficient to reduce the carbon emission levels.