May be impractical (calculating amount of emission is hard)
Technical limitations
Easier to implement
Can avoid technical difficulties
Highly effective
More costly as no gov. revenue
Can still face technical difficulties
Cost involving monitoring regulations
Unlikely
Much communication needed
May not be effective
Difficult to measure
External benefits created by producers
MSC < MPC
MPC – MSC = external benefit
Positive production externality
Direct government provision to producers to continue to continue to produce goods/services
Can be capital or resources
Positive production externality
Subsidy to a firm per unit of the good provided = external benefit
External benefits created by consumers
Often caused by consumption of merit goods
MSB > MPB
MSB –MPB = external benefit
Positive consumption externality
Regulations to promote greater consumption of goods with positive externalities