Climate externalities (micro)

Question 1

What climate policies has the UK government introduced?

Answer 1

• Banning the sale of new petrol and diesel cars by 2030
• Banning the sale of new gas boilers by mid-2030s
• Since leaving the EU - trade-able pollution permit scheme - Emission Trading Scheme (ETS)

Question 2

What has the UK government cut subsidies on?

Answer 2

• electric cars
• solar panels

Question 3

PROs of implementing a carbon tax and if countries should implement the policy?

Answer 3

• Makes polluters pay external cost of carbon emissions
• In theory, enables greater social efficiency, as we pay full social cost
• Raises revenue which can be spent on mitigating effects of pollution
• Encourages firms and consumers to look for alternatives e.g. solar power
• Reduces environmental costs associated with excess carbon pollution

Question 4

CONs of implementing a carbon tax and should countries implement the policy?

Answer 4

• Business claim higher tax can discourage investment and economic growth.
• May encourage tax evasion - firms polluting in secret to avoid tax
• It can be difficult to measure external costs - and how much tax should actually be.
• Administration costs in measuring pollution and collecting tax
• Firms may shift production to countries without a carbon tax.

Question 5

What have countries that have implemented carbon taxes seen in the case of results?

Answer 5

Encouraging results - resulting in lower carbon emissions that would have otherwise occured

Question 6

Give an example of a successful implementation of carbon tax/pricing.

Answer 6

British Colombia - a province in Canada

Introduced a scheme in 2008 to charge a levy on carbon. They saw fuel consumption decrease by 17% in that province while the rest of Canada’s fuel consumption increased more than 1%.

Question 7

What has the government done for grants for electric vehicles?

Answer 7

Cut grants (subsidies) for electric vehicles in the UK

subsidies for cars below £32,000 will see subsidies reduced from £2,500 to £1,500

Question 8

Why is the government reducing Electric Vehicle subsidies

Answer 8

• As there is a larger market for electric cars with more choices and higher taxes on petrol and diesel cars is an incentive for people to go electric.
• Company car purchase using opportunity of salary sacrifice schemes supports rising number of purchases, allowing government to spend money on EV charging infrastructure instead.

Question 9

What are problems with electric vehicle (EV) subsidies?

Answer 9

Due to high purchase costs of many EV - grants supporting their purchase can often benefit those who can already afford the outlay.