Question

1. Give examples of externalities that we observe, and even contribute to, in our daily lives. Briefly discuss their potential economic and social costs.

2. As of 2019, over 70 jurisdictions, representing about 20% of global greenhouse gases emissions, have put a price on carbon. Can a "national" carbon tax reduce "global" warming? What other 'climate actions" should be taken by individuals, businesses and governments?

Answer 1

1.Externalities such as using an old vehicle with higher carbon emissions, this will increase the economic costs of purifying the air and social costs of higher health expenditure because of increased pollution levels. A teacher teaching inefficiently, this will increase the potential economic costs when the students graduate with unskilled knowledge, which will lead to decline in productivity levels, plus social costs of joining a class and having to spend more.

2. National carbon tax can reduce global warming as companies collectively will have to reduce carbon emissions and opt for alternatives. Individuals should use recyclable products as much as possible, businesses should generate final product by using renewable materials and cost effective ways to recycle the product. Governments should impose a substantial tax on high polluting industries and subsidized tax rates for those businesses who use recyclable materials.