What Two Policies Could You Use to Reduce the Total Amount of Emissions

1. What two policies could you use to reduce the total amount of emissions? Emissions taxes and tradable emissions permit.

2. Why do you think each would work? If power companies are required to pay a tax on each ton of emissions, then they would have incentive to limit the emissions to the socially optimal quantity. By using the tradable emissions permit it is creating the incentive to produce the same amount with less emission. By reducing the emission, you are now able to sell that unit of emission to a company that is in need.

3. What would the benefits of each action be (besides emission reduction)? Emission taxes and tradable permits provide incentives to create and use technology that emits less pollution- new technology that lowers the socially optimal level of pollution.

4. What would the costs of each action be? The cost of the tradable permits would be the opportunity cost of the one ton of emission you are selling. If your company is able to reduce their emissions and free a permit, then they are able to sell that permit to another company. The cost of the emission tax option would target the pollution directly by controlling the production of the original good, by giving the cost a monetary value.

5. How would you decide what was the best level of emission reduction? I think that I would evaluate each possible solution very carefully. I would compare the positive externalities and the negative as well as the costs. I would see if I was able to lower my emission levels to see if the tradable permits would benefit me more. I think I would see what kind of technology I could install to make the necessary changes in the emission levels.