In this lecture the professor discusses how to model emissions pricing, which can be implemented by for example a tax or a cap and trade system. When it comes to abating firms face the choice of either reducing emissions intensity or producing less. Does for example the optimal emissions price equal the marginal damage? How are firms affected? And what incentives does firms have with an abatement scheme as Grandfathering?
In part 2 the professor goes on and discusses incomplete regulatory coverage and how consumption can shift due to this, and what can be done to avoid such shifts.
For OBR’s is 100% rebating necessarily the optimal? The professor compares welfare gains between unregulated markets, untaxed, rebated and non-rebated, and she discusses as an example the sensitivity of U.S. welfare changes and how this affects politics.
The Professor also compares countries and how they are affected differently.