Economics class: UK carbon trading system likely to lead to government intervention, traders warn
Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.
This article picked by a teacher with suggested questions is part of the Financial Times free schools access programme. Details/registration here.
Specification:
Market failure
Click to read the article below and then answer the questions:
UK carbon trading system likely to lead to government intervention, traders warn
Outline the purpose of the UK ETS
Define negative externality
Using a diagram, analyse the effects of the overproduction of a negative externality
Explain the ‘cap and trade’ approach to reducing emissions
Using a diagram, explain why ‘pent-up demand and the UK’s strict emissions targets are expected to lead to a sustained rally in the price of carbon credits
Briefly outline the possible interventions under the Cost Containment Mechanism (CCM)
‘Any intervention would . . . prove embarrassing for the British government . . . raise questions about its commitment to allowing market forces to determine the price commensurate with its ultimate policy objective of net zero.’ Using a diagram, analyse the effects of such intervention
Gavin Clarke, Emmanuel College
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