Exxon recently announced that it will spend $1 million over the next two years to promote and lobby for a carbon tax. Carbon taxes create incentive to reduce consumption of fossil fuels. Nobel prize-winning economist William Nordhaus has argued such a tax is essential to any well-thought-out policy to combat global warming. All answers must be explained from an economic standpoint.

This is an ECON CLASS. THINK ABOUT HOW THE ECONOMY IS AFFECTED. PLEASE ANSWER QUESTIONS FROM AN ECONOMIC STANDPOINT.

a) Why is some sort of government intervention (tax or regulation) necessary to reduce global warming? Why won't individuals and firms take sufficient measures on their own to reduce the production of greenhouse gases?

b) What impact would a carbon tax have on gasoline prices and output? Explain.

c) Would this $1 million expenditure meet Friedman's or Porter's criteria for a wise corporate investment? Or is this a case of a bunch of executives being philanthropic with other people's money? Explain.