Enviromental market failure HELP (1 Viewer)

[steve_ell]

hey. i was just wondering if n e one knows what government policies have been used to stop the market failure associated with the emmision of greenhouse gases. so far the only one i have the the possible introduction of permits.

doen n e one know n e others.. in need about three more and cant fing n e thing n e where.

Thanx.

 

[i-color]

one u can use is the kyoto protocol which attempts to reduce CO2 emissions...however the govt refuses to ratify the treaty rendering it ineffective in reducing emissions....

 

[steve_ell]

yeh but how does the kioto agreement help reduce market failure... thats what i dont understand

 

[i-color]

well ignore the kyoto protocol....

say for example if u had a tax on emitting pollution. when you have market failure, it's because the price of a good doesn't take into the negative externality. So your supply curve is just your cost of production. If you tax producers by the amount of their externality, then this would shift supply curve to the left (since cost of production is now higher) therefore this new supply curve would coincide with the social cost of producing the good....thus it would solve the externality problem. ie a tax forces suppliers to take into account the cost of the exteralities they produce on top of their cost of production....

i really need a diagram to explain properly

 

[steve_ell]

thanz dude i get ya.