Political Economy of the Environment
Cap and dividend Aggregate US demand for carbon emissions (or the marginal benefit of carbon emissions) is approximately:
Q = 1,500,000,000 - 500,000P.
Where Q is calculated tons of carbon per year and P is calculated in dollars.
Assume that the government auctioned off the "correct" number of permits, but their price was lower than expected. Discuss how would you advise the government to tweak the policy for the following year? Why?