Economic Incentives

Week Four Guidance

            Congratulations, we have gotten past the half-way point of the class.  I have enjoyed reading your posts and written assignments.  Just a note on the use of old papers from past classes: Partial recycling of papers is allowed in this course however, all submissions in this course must demonstrate substantial new learning related to the course concepts and learning objectives.  Under no circumstances are you allowed to submit an exact copy of a prior paper in an attempt to satisfy an assignment in this course.

            Also just a reminder, to receive full credit for your initial discussion posts you must include at least two citations (Author, Year, pg. #) as support to your ideas and answers.  Also your initial postings should be at least 200 words and have a scholarly voice or tone.  On to our week four topics emission charges, fuel economy and economic incentives.

            You will be reading chapters fourteen, fifteen, seventeen and eighteen.  Your first discussion question involves emission charges and this topic will also be part of your weekly written assignment.  You will compare how Europe is leaning towards emission charges versus the method of emission permits in the United States.  Also decide if the United States should move towards emission charges similar to Europe.  Tietenberg and Lewis (2012) state, “One approach, the choice of several countries including the United States, is to select specific legal levels of pollution based on some other criterion, such as providing adequate margins of safety for human or ecological health” (p. 368).   The authors go further and explain what an emission charge is, “An emissions charge is a fee, collected by the government, levied on each unit of pollutant emitted into the air or water” (p. 371).  The thought here is that companies would limit pollution due to the increased costs due to the emissions charge.  The authors then go into emissions trading which will be the topic of your written assignment. 

            The second discussion question is on fuel economy and the government’s role in it.  Should the government increase fuel taxes or should the government have the manufacturers increase fuel efficiency standards?  Remember that fuel taxes would increase costs to the consumer but increasing fuel efficiency standards for the manufacturer could also increase costs to the consumers as the companies could pass these increased fuel efficiency costs to the consumers by increasing prices of these cars.  Tietenberg and Lewis (2012) review CAFÉ standards and fuel taxes in the Debate 17.1 section and review the CAFÉ standards in chapter seventeen.  The authors state, “Manufacturers have paid more than $590 million in CAFÉ fines since 1983” (p. 450).   Make sure to review these topics in chapter seventeen when preparing your responses. 

            Your assignment is based on emissions trading or cap and trade as Tietenberg and Lewis (2012) describe as, “Under this system, all sources face a limit on their emissions and they are allocated (or sold) allowances to emit” (p. 373).  Basically there is a “cap” set and allowances are traded as the authors state, “Firms emitting more than their holdings would buy additional allowances from firms who are emitting less than authorized” (p. 373).  So a firm would make money being under the cap established by selling their extra allowances, giving firms incentive to be under the cap.  But does creating a market seem ethical to help the environment?  That is the main topic of your assignment.  One ethical theory is Utilitarianism. This view of ethics is described by Beauchamp and Bowie (2004) as, “An action or practice is right if it leads to the best possible balance of good consequences over bad consequences for all the parties affected” (p. 17).  Another theory is Kantian theory, that address how people need to respect one another to be ethical as Beauchamp and Bowie (2004) explain, “In Kantian theories respect for the human being is said to be necessary-not just as an option or at one’s discretion” (p. 23).  Keep these ethical theories in mind while preparing your written assignment.  Also make sure to review chapter fourteen to help with the assignment.  Here is a link to an interesting article on this topic: http://www.studentpulse.com/articles/656/3/the-challenges-of-climate-change-policy-explaining-the-failure-of-cap-and-trade-in-the-united-states-with-a-multiple-streams-framework  , and also attached is another article related to emissions trading and below a video on carbon credits.  

Remember it is highly suggested that you use the parts of the question (a, b, c) as headings in your paper to enhance the focus and organization of your paper.    

            Your initial postings are due on Thursday 4/23, and to respond to your fellow student’s initial postings during the week.  Your assignment is due on Monday 4/27.  Please send me specific questions on the assignments if you have any issues completing them.  Keep up the good work!

References

Beauchamp, T.L., & Bowie, N.E. (2004). Ethical theory and business. (7th Ed.). Upper Saddle     River, NJ: Prentice Hall.

Tietenberg, T., & Lewis, L. (2012).  Environmental and natural resource economics (9th ed.).  Upper Saddle River, NJ: Pearson Addison-Wesley. ISBN: 9780131392595