Answer to question 1:

The mitigation of GHG is characterized as a public good. Greenhouse gas (GHG) is a gaseous compound that is able to absorb the infrared radiation by capturing and grasping heat in the environment. The greenhouse effect is caused by the greenhouses gases. Due to this effect, the temperature of the atmosphere rises which ultimately leads to the global warming effect. Therefore, GHG emission problem is an example of negative externality which includes some spillover cost or external costs. Negative externalities occur when the consumption of a good or service imposes harm on others who are not directly associated with either the production or the consumption of that good. GHG is considered as a public ‘bad’ since it is just the opposite of public good. It gives disutility to people when consumed. Some more examples of public bad are air pollution, air pollution etc. GHG is a public bad, therefore GHG mitigation will be a public good. The people who can’t pay for GHG mitigation, they can’t be excluded from having the advantages of avoiding the harmful effects of the climate. Emission of GHG represents a negative externality which leads the to market failure. Therefore, the mitigation of GHG will be considered as public good.

To reduce the GHG emission, two types of policy are taken: mitigation policy and adaptation policy. In mitigation policy options, there are two broad responses: regulatory approaches and the market based approaches. The main instruments for market based approach are GHG tax and emission trading schemes or ETS. These are the major implications for the mitigation for GHG.

Answer to question 2

a) The Minister for the Environment has a media interview about a proposed carbon tax. As the principal advisor of the Minister for the Environment, some suggestions can be made. The following three points explain the government’s intervention to mitigate the climate change.

Today the world is facing through many problems. One of the major problems is climate change due to air pollution. Some other problems are greenhouse gas emission, global warming etc. Climate change is an example of negative externality.

The effects of climate change are increasing over time. Another feature of climate change is that significant uncertainties exist about the possible type, size and timing of impacts. To produce the socially efficient outcome will be another intervention of the government to mitigate the climate change.

To gather information about the rural economies and research on how they utilize agro biodiversity to cope with the climate change is another objective of the government to mitigate the climate change.

b) A carbon tax is the preferred policy than the emission trading schemes or ETS because

This is a market based policy instrument that involves the behavioural change. It provides opportunities and incentives to decrease the cost of mitigation and therefore provides an efficient outcome.

This policy uses the power of market price. According to many researchers, carbon pricing is the most efficient mechanism.

Imposing a tax on carbon will make the market forces to reduce the demand for carbon based industries like fuels (Fahimnia et al. 2015).