Showing posts from December, 2020

Are market solutions likely to be successful in tackling climate change?

Cameron Jones- Guest Writer Greenhouse gas emissions such as CO2 (emitted by transport, for example) being released into the air are causing the Earth to heat up, by trapping heat in the atmosphere rather than letting it out.  Anthropogenic climate change has accelerated this by burning fossil fuels (Friends of the Earth, 2017). Through a carbon tax along with opening energy markets to competition, it is hoped market solutions will play a large part in reducing CO2 emissions. The implementation of a carbon tax: Currently, the free market provides at Q, P, but there is a negative externality, meaning that the full marginal social cost (MSC) is not considered. The gases not only affecting the marginal private costs (MPC) to the people in the market, but spilling over to the wider society in the form of poorer air quality and thus the MSC is significantly higher than the MPC. The deadweight loss given the misallocation of resources is shown as the shaded triangle. A unit of tax is applied