Cap and Trade and Environmental Economics

These flashcards cover key terminology and concepts from the lecture on cap and trade, environmental economics, and the theories surrounding pollution and property rights.

Cap and Trade

A system that sets limits (caps) on emissions and allows companies to buy and sell permits to emit a specific amount.

Emission Permits

Permits that allow the holder to emit a certain amount of pollutants, crucial in a cap and trade system.

Vintage 2024 Allowance Allocation

Allocation of emission permits determined for various sectors such as utilities and gas suppliers in California.

Auction Proceeds

Funds raised from the auctioning of emission permits, which can be used for environmental protection initiatives.

Abatement

The reduction of emissions, typically by using less polluting technologies or methods.

Equilibrium Market Price

The market price at which the quantity of permits demanded equals the quantity supplied, reflecting the cost of CO2 reduction.

Pigouvian Tax

A tax imposed on activities that generate negative externalities, intended to correct an inefficient market outcome.

Coasian Bargain

An agreement between parties that allows for a mutually beneficial outcome regarding externalities or rights.

Common Access Resources

Resources that are available to all but are not owned by anyone, leading to potential over-exploitation.

Ronald Coase

A British economist known for his work on externalities and property rights, awarded the Nobel Prize in Economic Sciences in 1991.

Private Cost

The cost borne by an individual or firm when making decisions regarding pollution or resource use.

Social Cost

The total cost to society, including both private costs and the costs of externalities.