Analysis
Sweden had a tax of $150 per tonne of carbon dioxide. This decreased emissions by 30% in 1990. Economy continued to rise by 50%.
Evaluation
Short-run
- Incentives to reduce carbon emissions
- The tax revenue generated can be used to fund green initiatives and research.
Long-run
- Innovation to potentially move the MSC to the right.
Assumption:
- Corporations act with the financial incentive
Pros:
- Not susceptible to favouritism.
- Political Pressures