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Showing posts from September, 2010

Carbon, Tradable permits and Pigouvian Taxes.

The Stern Review of the Economics of Climate change has identified greenhouse gas emissions as the greatest market failure in history. Carbon dioxide (CO2) emissions are a leading cause of climate change and have been targeted by government and non-governmental organizations as an area of grave policy concern. Policy proposals to ameliorate CO2 emissions have centred around two broadly based methods: “ economic instruments” and “command and control regulations”. The adoption of economic instruments to regulate the problem of CO2 emissions can entail either the introduction of market mechanisms to price emissions and allocate the right to emit limited quantities of CO2, or price-based instruments such as tax regimes and subsidies. Command and control regulations are policies that involve direct government interventions into the forms of practices surrounding CO2 Emissions, from technological standards to performance targets. The mainstream economics literature on policy instruments…