Commentary. A Conservative Answer to Climate Change
by: George P. Shultz and James A. Baker III
Feb 08, 2017
Click here to view the full article on WSJ.com
by: George P. Shultz and James A. Baker III
Feb 08, 2017
Click here to view the full article on WSJ.com
TOPICS: Environmental Regulation
SUMMARY: Enacting a carbon tax would free up private firms to find the most efficient ways to cut emissions.
CLASSROOM APPLICATION: Students can evaluate whether a carbon tax set at the appropriate level would be yield allocative efficiency. They can also evaluate whether a tax would minimize the cost of a given reduction in carbon emissions. Students can compare a carbon tax and a cap-and-trade mechanism.
QUESTIONS:
1. (Advanced) Compare the economic efficiency of a carbon tax and cap and trade mechanism. In doing so, set the cap at the same level as the equilibrium level of emissions under a carbon tax.
2. (Introductory) What are the four pillars of the proposed solution?
3. (Advanced) "A levy on emissions would free companies to find the most efficient way to reduce their carbon footprint." However, would the firms with the lowest costs of reducing emissions be the ones that do so?
4. (Advanced) What is a "Pigouvian tax"? Are the authors proposing such a tax?
1. (Advanced) Compare the economic efficiency of a carbon tax and cap and trade mechanism. In doing so, set the cap at the same level as the equilibrium level of emissions under a carbon tax.
2. (Introductory) What are the four pillars of the proposed solution?
3. (Advanced) "A levy on emissions would free companies to find the most efficient way to reduce their carbon footprint." However, would the firms with the lowest costs of reducing emissions be the ones that do so?
4. (Advanced) What is a "Pigouvian tax"? Are the authors proposing such a tax?
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