Econ 1101 1st Edition Lecture 16 Outline of Last Lecture 1. Pigouvian Taxa. AlternativesOutline of Current Lecture 2. Carbon Emissions3. New Issue: International Trade4. Impacts of tariffs and quotasCurrent LectureKyoto Protocol: Biggest problem? United States didn’t sign it because developing countries like India and China were not part of the agreement. They still went through with it but it was not effective. Maybe without it, emissions in Europe would be higher but they did not reach their goal.Why are price of quotas low?Weak economy and shift in carbon heavy industries out of EuropeClean energytoo many allowances given out?Could be fixed by setting a cap somewhere that society would feel it and have incentive to change.Carbon Tax $20/ton of CO2 per gallon of gas$0.20 a gallon would be appropriate Pigouvian tax.Pigouvian tax tax externalities market doesn’t see externality so impose a tax to make people “see” it.Germany’s push for clean energyenergiewende = “energy transistion”get 30% electric energy from clean energy (wind or solar power)United States uses 15% clean energy.These notes represent a detailed interpretation of the professor’s lecture. GradeBuddy is best used as a supplement to your own notes, not as a substitute.Wind and solar power are intermittentthey need conventional sources as backup.More units produced cheaper average cost.How economically feasible are backup sources…consider the fact more units produced the cheaper the average cost.Carbon Emission in the United StatesDown since 2007Why?increase MPGpolicy changeshigher gas pricecontinue decline in manufacturingnatural gas replacing coal because success of fracking…natural gas produces twice as much heat. International TradeEconland opens up World trade$1 per widget in world economyP(world) = 1With free trade it drives the price in Econland towards the world price.At this price consumers supply one unit but demand nine.9-8=1the 8 demanded is made up for by IMPORTSEconland is happier with trade. There is more surplus.Imports are NOT pareto efficient because the producers are worse off.A tariff is a tax on imports but not on domestic
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