Common pool resources

Common pool resources are natural resources that are avaliable for everyone at zero price. However, they are rivalous because obtaining ot hese by individual decrease the amount for others, but they are non-excludable so everyone as well as non payers can obtain one.

Example of them are fishes in the ocean, oysters, lakes, river, forests

Common Fishery Policy (quotas on fish) that requires fishermans to obtain only a certain amount of fish.

Common access resources are a case of market failure because the individual benefits of consuming or using the resource are much greater than the private cost of doing so, and this gives the individual an incentive to keep consuming it. Therefore, there is an over-consumption with respect to what is optimal for society.

It is also connected with the concept of sustainability, because consumption of these natural scare resources may decrease the avalabile amount for futhure generations (serious environmental degradation). In order to meet the needs of the over-consuming population. Thus leads to the market failure and inefficent alocation of the resources.

Fishing industry should fish at the same rate as natural replacement.

\n [[carbon tax is a per unit tax paid on carbon emissions from burning fossil fuels. It is placed on firms that produce carbon dioxide through their production processes. For example, in 2019, Canada initially placed a $16 per tonne tax on carbon dioxide emissions, which was increased to $39 per tonne in 2022.[[

Carbon taxes are most effective when the size of the tax is exactly equal to the externality (or the social costs associated with climate change). A tax can incentivise firms to produce at the social optimum.

Tradable emission permit is a permit to pollute. Each firm have a certain amount that can pollute of CO2. If goverment find to much pollution in the air they can reduce the amount of permission to buy and increased the prices for it. The quantity for polluting decrease and firms can not afford it. Firms that pollute less can sell their trade emission permit to firms that pollute more. If goverment find a situation where there is too much pollution in the air they decrease the quantity and that could also reduce the ability of firms to produce their goods or they can switch to clean energy.

 ^^A cap and trade system is where the government sets emission reduction targets and encourages firms to meet them by creating economic incentives.^^

Benefits of this cap and trade system is that goverment earn revenue from selling this trade emission permit and can afford some public goods from it, becasue carbon tax waork like any other tax. It also ims to promote using clean and affordable energy that do not emit any pollutions.

Disadvantages it is hard to measure how much carbon emission some firms have pollute. Firms that pollute less can sell their permition to pollute to firms that pollute more. That do not fit into the rules of this cap and trade system. It is also hard to set a good price for this carbon tax, becasue it is hard to measure how much pollution is generated and flow into the environment.

Carbon tax vs cap and cap and trade system

For a carbon tax, the government sets the price for carbon, and the market responds by decreasing emissions. 

Cap and trade system can set a quota and can target it by increasing the price so firms can pay more in order to have an ability to pollute.

Goverment can also gran some financial assistance in form of subsidies for renewable nergy, or pass a legislation that aims to control the production process like using a specific machinery that is friendly for environment.