A carbon tax makes the individuals and firms to pay for the full social cost of...

A carbon tax makes the individuals and firms to pay for the full social cost of carbon pollution. Do you think the carbon tax is a good policy to reduce greenhouse gas emissions in Australia? Why or why not? Whenever appropriate, you should supplement your answers with suitable diagrams. (Hint: What are the pros and cons of a carbon tax?

how to draw a diagram????????

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Expert Solution

The pros of carbon tax : Polluters have to pay for generating negative externality or external cost of emission is the tax amount , Maximum social efficieny can be reached when full externality is taxed . helps government to earn revenue from taxation , firms seek other cleaner modes of production in order to escape tax . Lastly , it definitely helps to curb pollution to a great extent .

The cons of carbon tax : Taxes may discourage investment and growth in production , firms may seek illegal ways to evade taxes which raises corruption in economy , firms can retreat to other countries without carbon tax , it is a tedious process in evaluating and collection of taxes .

So carbon tax can prove to be a good policy to reduce greenhouse gas emissions in Australia .

Rahul Sunny answered 1 year ago

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