Question

(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

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

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.

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.

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.

Key concepts

Climate Change

Climate change is a critical and urgent issue facing the globe today. It refers to the long-term alteration of temperature and typical weather patterns in a place. This phenomenon is largely attributed to human activities, particularly the burning of fossil fuels like coal, oil, and gas, which release carbon dioxide and other greenhouse gases into the Earth's atmosphere. These gases trap heat, resulting in the greenhouse effect, which leads to global warming.

Key impacts of climate change include rising sea levels, more frequent extreme weather events, and disruptions to ecosystems and agriculture. Understanding these changes is essential for implementing policies aimed at mitigating their effects. One of these policies is the carbon tax, designed as a deterrent against excessive emissions, attempting to slow the advance of climate change.

Market Forces

Market forces refer to the economic factors that influence the price and availability of goods and services based on supply and demand. When it comes to tackling climate change, implementing a carbon tax utilizes these forces to promote greener practices.

By imposing a tax on carbon-based fuels, the cost of using fossil fuels increases. This creates an incentive for businesses to innovate and seek more sustainable energy sources or to improve energy efficiency in order to minimize costs. The idea is that these market forces will lead to natural shifts towards cleaner practices, making the market itself a solution driver. As businesses compete to find cheaper, sustainable solutions, market forces push industries towards reducing emissions.

This method leverages economic principles to foster an environment where going green is not just environmentally favorable but also financially beneficial for businesses.

Carbon Emissions Reduction

Reducing carbon emissions is a core goal in combating climate change. Carbon emissions primarily come from burning fossil fuels for electricity, transportation, and industrial activities. A carbon tax serves as a powerful tool for motivating emissions reductions.

Here’s how it works:

• Increases the cost of carbon emissions, prompting companies to rethink their energy strategies.
• Encourages innovation and investments in renewable energy technologies like solar, wind, and hydroelectric power.
• Leads to the development of more energy-efficient practices across industries.
• Motivates consumers to opt for energy-saving products and sustainable lifestyle choices.

By driving these changes, a carbon tax helps propel a shift towards a low-carbon future where the focus is on sustainable development and reduced reliance on non-renewable energy sources.