CLIMATE CHANGE ECONOMICS AND POLICY

Reflect: In module 2 the economics of climate change and policy is introduced. In week 4, economic theory relating to externalities and public goods is introduced. It is argued that GHG emissions are an externality in the production and consumption of fossil fuels and that GHG mitigation has the characteristics of a public good. In week 5, BCA of climate change is introduced, including the potential risks and uncertainty. In week 6, the policies of mitigation and adaptation are introduced.

Respond: Use the readings and lecture notes for assistance. (Submit the tutorial to the dropbox by the due date)

1. Why is the mitigation of GHG's characterised as a public good and what is the main implication of this?

2. Assume you are the principal advisor of the Minister for the Environment. The Minister has an upcoming media interview about a proposed carbon tax and would like precise and concise answers for the following potential topics.

(a) In three dot points explain the rationale for the government's intervention to mitigate climate change?

(b) In three dot points explain why a carbon tax is the preferred policy?

3. Write a one paragraph response to the following question. "Why do most economists put their trust in ‘market-based' solutions as opposed to direct government interventions (so called command and control approaches) to mitigate GHGs?"