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Chapter 5: Problem 14

(Related to the Chapter Opener on page 146) In a letter to the New York Times, Suzanne McCarron, an executive at ExxonMobil, argued that a carbon tax would "allow market forces to drive solutions." a. According to McCarron, what problem would a carbon tax solve? b. How would a carbon tax allow market forces to "drive solutions"?

Short Answer

Expert verified
According to McCarron, a carbon tax would solve the problem of excessive carbon dioxide emissions, which contribute significantly to climate change. A carbon tax would allow market forces to drive solutions by making the emission of CO2 financially detrimental for businesses. This, in turn, would incentivize these entities to reduce emissions by innovating or adopting cleaner technologies and energy sources.

Step by step solution

01

Understand McCarron's View on Carbon Tax

Examine the statement made by Suzanne McCarron. Based on the information provided, it's clear that she supports the implementation of a carbon tax. Implicit in her argument is the idea that a carbon tax would act as a solution to a certain problem. The first step then is to determine what that problem may be, based on the information provided and an understanding of what a carbon tax is meant to address.
02

Problem Solved by Carbon Tax

A carbon tax is a fee imposed on the burning of carbon-based fuels (coal, oil, gas). It is primarily aimed to reduce carbon dioxide emissions, a major cause of global warming. Thus, according to McCarron, the problem that a carbon tax would solve is the excessive carbon dioxide emissions contributing to climate change.
03

Carbon Tax Driving Market Forces

The next part of the exercise requires understanding how a carbon tax could allow market forces to 'drive solutions'. In economic terms, a carbon tax makes emitting carbon dioxide into the atmosphere expensive. This provides companies with a financial incentive to reduce emissions by innovating energy-efficient technologies or switching to cleaner energy sources. Hence, market forces, in this context, refer to the incentive for businesses to move towards cleaner and more sustainable practices, driving solutions to the problem of climate change.

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Most popular questions from this chapter

(Related to the Apply the Concept on page 163 ) An economics student made the following comment about a proposed carbon tax: I read that a tax on carbon would have a greater negative effect on low-income consumers than high-income consumers, but I disagree. Business executives spend a lot of money and time traveling- both by car and plane. Many rich people have homes that are considerably larger than the average family's home. Heating and air conditioning bills are certainly greater for larger homes than smaller homes. The cost of a carbon tax would surely be greater for those with the highest incomes. Explain whether you agree that a carbon tax would impose a greater burden on high-income consumers than low-income consumers.

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