Environmental Economics theories perform studies to determine the theoretical effects of environmental policies on the economy . Environmental policies include policies such as carbon taxes and emission trading schemes. Carbon tax directly sets a price on carbon by defining a tax rate on greenhouse gas emissions or carbon content of fossil fuels. Environmental economics basically focuses on the financial impact of environmental policies put in place.

Implications of carbon tax and the trading scheme

Drawing on economic theories from the module as well as evidence from the research articles there are strengths and limitations of carbon taxes and emission trading schemes as tools aiming to reduce carbon emissions. There are also challenges  that arise in their implementation. The question invites you to use economic analysis to explain the different implications of carbon tax and the trading scheme, and link them to the theories related to externalities. You may wish to consider arguments in favors of and against tackling carbon emissions through carbon tax and trading schemes at a global level as well as from the perspective of individual nation states and consumers.

Concepts of carbon tax: Environmental economics

Consider the global aspects of climate change and the potential impact of individual nation policy. Theoretical approaches discussed , in particular in section 3 are likely to be relevant. Of relevance to the topic are the concepts of cost benefit analysis aspects. In addition, the social discounting and social cost of carbon in the analysis. The articles provide an opportunity to understand how to apply a carbon tax . For example, by setting carbon pricing, creates different impacts on different agents in society.

Environmental economics Carbon mitigation strategies

It is also  relevant to consider carbon mitigation strategies.  Its also important to note how decisions about their application may relate to differences in economic valuation of the environment. It may also be helpful to review on welfare economics and social choice. These provides some background about government provision and market failure.

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