Australia has not yet agreed to net zero C02 emissions by 2050. Some sectors of the economy (such as agriculture) receive government subsidies for using diesel in their transportation, power generation etc - despite it being a particularly 'dirty' (high Co2) emitter. Using the concepts presented in the course, discuss:

(a) why diesel is likely to be over produced and consumed even without government intervention (4 marks)

(b) the effect of government subsidies that lower the cost of diesel (4 marks)

(c) one possible market-based solution to the over consumption of diesel(2 marks)

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