Greenhouse Gas Emissions: Carbon Tax vs Cap and Trade

1) Create standard supply and demand curves to illustrate the negative externality that comes with using gasoline. Explain why the free market fails.

2) Explain how a carbon tax could, in theory, correct for this market failure. Show in your graph the price consumers face, the price producers face, and the revenues raised.

3) What is the gasoline tax in your State (or Country if you are not in the US). How much is raised and how is it spent?

4) Createa generic supply and demand graph to illustrate how a cap and trade program works (note, this is now the pollution permit market ... not the gasoline market - do not mix up the two markets!). Show what happens if the cap is lowered over time.

5) Research and provide details on the Cap and Trade Program of either California, South Korea, or the European Union. How many permits have been / are being issued? Are they sold or given away? Where do the revenues go? Has it been successful? What are the problems? .... you know .... learn about it and explain it to the viewer.

6)Createa supply and demand graph to illustrate the Cap and Trade program ... using actual price and quantity data you have found if possible.

Please do not forget to draw the supply demand curve and answer with the number to the respective questions so it becomes easy to identify.