Public Sector Economics and Finance

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Honourable X and Y intend to introduce legislation before the close of parliament this year. The bill would require the administrator of the EPA to spread regulations to limit the greenhouse gas emissions from the electricity generation, transportation, industrial and commercial economic sectors as defined by EPA’s Inventory of Sierra Leone Greenhouse Gas Emissions and Sinks. The affected sectors represent approximately 85% of the overall Sierra Leone emissions for the year 2010. The bill also would provide for the trading of emissions allowances and reductions through the government provided greenhouse gas database which would contain an inventory of emissions and registry of reductions. Discuss the rationale for this type of legislation in the light of (1) its motivation and chances of success (2) how it is supposed to work (3) any theoretical and practical weaknesses of such a tradable system for greenhouse gases. Try to use specific examples and evidence to support your views. Answer 3

1.The motivation of this legislation is the limit of the emission of the greenhouse gas. This is an example of the pigouvian tax. The chance of success is to have technical standard regulation introduced. 2.This is where command and control comes in, with the installation of a technical machine that will be used as a monitor. This is currently being done with National Power Authority meters. They are factual and speak for themselves. The goal being to reduce the emission of these gases. It will be a sort of Performance Standard. 3.A. One weakness is the poor will bear the cost, as there will be an increase in the price of the good produced. The cost of the tax will be factored into the cost and the consumers will pay. b. there is also the social cost. The case of not all pockets are the same. This brings in access to the product. E.g paint c. the idea is not to leave the consumer worse off.
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