Chapter Questions
How might an emission charge program be designed to reduce automobile emissions?
Explain how emission charges solve the equimarginal problem.
Opponents of emission tax policies sometimes assert that they are simply a way of letting firms buy the right to pollute. Is this a reasonable criticism?
When emission charges are put into effect, who ultimately ends up paying for them? Is this fair?
Emission charges are sometimes seen as creating a "double burden": Firms must pay the costs of reducing emissions and also pay the government for polluting discharges. How might a charge system be designed to reduce this double burden?
Refer to Figure 12.1. Suppose the emissions tax is $$\$ 95 /$$ ton $/ \mathrm{month}$. Find the efficient level of emissions for the firm. Explain why the firm would not reduce its emissions to 1 ton / month.