Carbon Emission HW Question (Check My Graph)?
Kyoto attempts to reduce the likelihood of global warming from excessive greenhouse gas emissions. Under the Kyoto Protocol, many developed countries (such as Russia, the United Kingdom, and Japan) made specific commitments to reduce carbon dioxide emissions. The Protocol refers to these countries as Annex I countries.
Under the emissions trading program described in the NPR story, each Annex I country receives emissions permits, or credits, to distribute to carbon-emitting firms in its economy. Each credit allows the holder to emit 1 ton of carbon dioxide during the year. If, at the end of the year, a firm has emitted more pollution than its credits allow, it pays a large fine. If a firm needs to emit more pollution than its permits allow, the firm can buy the additional credits it needs from a firm that does not need all of its pollution credits.
(Keep Reading into next post)
Again, consider the market for carbon credits. The story mentions the notable absence of the United States in the 2005 Kyoto Protocol. Suppose the United States changes its policy and agrees to join the cap-and-trade emissions program with other Annex I countries.
U.S. entry into the Kyoto agreement would have two effects on the market for pollution permits:
First, the U.S. government and Kyoto participants would set a cap on American emissions and issue new credits to American firms in accordance with the cap. (Note that there is a difference between pollution worldwide and pollution from Kyoto participants. If the United States participates in Kyoto, pollution from Kyoto participants rises. However, as a Kyoto participant, the United States will cap emissions. Worldwide pollution will be lower when U.S. emissions are limited by the Kyoto agreement.)
Second, American firms in need of additional carbon credits would enter the global emissions market and bid for carbon credits.
Shift one or both of the curves to show how U.S. participation in the Kyoto cap-and-trade program would affect the market for carbon credits.
CHECK MY OWN GRAPH: http://i38.tinypic.com/24wrfqp.jpg
S1 and S2 represent supply…that’s what I shifted. Will the demand also shift or will it stay put? (it’ll be a lower price for pollution credits if supply is increased by the government, which i find hard to believe…I don’t know)
This happens to be an Aplia question from an assignment I use in my microeconomics class.
When the US agrees to participate in the Kyoto Protocol, 2 things happen
1. We have a larger demand for carbon credits (since we have US firms now needing them in order to emit carbon gases).
2. We have more carbon credits that have been given to the US to distribute to the firms within the US.
#1 will increase the demand for carbon permits
#2 will increase the supply of carbon permits.
You shift the demand and supply curves accordingly (I am hoping you know which direction is an increase. LOL)
Good luck with your homework!!
What a crock. Another genius government method to collect taxes and fees.
References :
This happens to be an Aplia question from an assignment I use in my microeconomics class.
When the US agrees to participate in the Kyoto Protocol, 2 things happen
1. We have a larger demand for carbon credits (since we have US firms now needing them in order to emit carbon gases).
2. We have more carbon credits that have been given to the US to distribute to the firms within the US.
#1 will increase the demand for carbon permits
#2 will increase the supply of carbon permits.
You shift the demand and supply curves accordingly (I am hoping you know which direction is an increase. LOL)
Good luck with your homework!!
References :