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20

Student: ___________________________________________________________________________

1. Employing a global CO2 price to contain mean projected warming to a specific target at least cost is an
example of ________.
A. a fiscal dividend
B. a climate stabilization goal
C. a cap and trade system
D. an emission trading system
2. When allowances are distributed to firms for free according to some allocation rule determined by the
regulator this is known as ________.
A. auctioning
B. trading
C. grandfathering
D. offsetting
3. The Canadian province with the highest greenhouse gas emissions is ________.
A. Ontario
B. British Columbia
C. Alberta
D. Quebec
4. Environment Canada's quota system to phase out ozone depleting chemicals did not restrict the supply
of specific CFCs or halons; rather it was set in term of ________ allowing for flexibility in meeting the
target.
A. marginal damage cost
B. ozone-depleting potential
C. marginal abatement cost
D. total allowable ozone
5. ________ is a particular problem in ________ which contain a disproportionately large share
of the world's wild species, but which are also under great pressure to pursue modern economic
development.
A. Habitat destruction; developed countries
B. Habitat destruction; developing countries
C. Biological uniformity; developed countries
D. Biological uniformity; developing countries
6. A transferable emission permit scheme will always be superior to an emission tax when it comes to
developing an economically efficient carbon pricing scheme.
True False
7. Developing a carbon pricing scheme with stable and predictable emission prices is an important design
goal for policymakers to keep in mind.
True False
8. If permits are distributed through an auction, governments can recycle the revenue in the form of tax cuts
to offset some losses experienced by firms.
True False
9. Carbon offsets result in either the same level of emission reduction at lower cost than in a system without
them, or greater emissions reduction at the same cost because the offset works like a withdrawal of
allowances from the market.
True False
10. The revenue from B.C.'s carbon tax flows back to households and industry in the form of cuts to personal
and corporate income tax rates, tax credits for low income and rural households, and some property tax
relief for industry.
True False
11. Canada's implicit carbon tax rates that are below those of the United States but higher than those in
Europe.
True False
12. Large multinational firms saw the potential for profits by developing substitutes for CFCs which helped
with phasing out its use.
True False
13. International embarrassment is enough of a deterrent to prevent the development of a black market in
CFCs.
True False
14. Biological diversity is a high priority for people who are struggling to get enough resources to achieve
some degree of economic security.
True False
15. It is important to preserve biodiversity because genetic diversity from wild species can add value to
agricultural breeding programs.
True False
16. Habitat maintenance is not essential for preserving biodiversity because breeding programs at zoos and
agricultural research stations are adequate for this purpose.
True False
17. List the six desirable design features for creating an economically efficient carbon pricing scheme.

18. List four design principles that economists recommend for setting up a cap-and-trade system.

19. List and briefly explain the five criteria that should be satisfied to establish an effective offset system that
leads to real emission reductions.
20. Using an example, discuss why economists are leery of using a fuel content rule that mandates using a
certain percentage of renewable fuel content to try and achieve greenhouse gas emission reductions.

21. Discuss the factors that helped make the Montreal Protocol a successful international treaty.
20 Key
1. Employing a global CO2 price to contain mean projected warming to a specific target at least cost is
an example of ________.
A. a fiscal dividend
B. a climate stabilization goal
C. a cap and trade system
D. an emission trading system
Accessibility: Keyboard Navigation
Difficulty: Easy
Field - Chapter 20 #1
Learning Objective: 20-01 Describe desirable design features of GHG pricing policies.
2. When allowances are distributed to firms for free according to some allocation rule determined by the
regulator this is known as ________.
A. auctioning
B. trading
C. grandfathering
D. offsetting
Accessibility: Keyboard Navigation
Difficulty: Easy
Field - Chapter 20 #2
Learning Objective: 20-02 Explain how design principles apply to examples of emission trading.
3. The Canadian province with the highest greenhouse gas emissions is ________.
A. Ontario
B. British Columbia
C. Alberta
D. Quebec
Accessibility: Keyboard Navigation
Difficulty: Easy
Field - Chapter 20 #3
Learning Objective: 20-03 Describe the features of Canadian GHG policies and how they use carbon pricing.
4. Environment Canada's quota system to phase out ozone depleting chemicals did not restrict the supply
of specific CFCs or halons; rather it was set in term of ________ allowing for flexibility in meeting
the target.
A. marginal damage cost
B. ozone-depleting potential
C. marginal abatement cost
D. total allowable ozone
Accessibility: Keyboard Navigation
Difficulty: Easy
Field - Chapter 20 #4
Learning Objective: 20-04 Explain how international agreement was reached to eliminate CFCs and how price incentives helped achieve the goal.
5. ________ is a particular problem in ________ which contain a disproportionately large share
of the world's wild species, but which are also under great pressure to pursue modern economic
development.
A. Habitat destruction; developed countries
B. Habitat destruction; developing countries
C. Biological uniformity; developed countries
D. Biological uniformity; developing countries
Accessibility: Keyboard Navigation
Difficulty: Easy
Field - Chapter 20 #5
Learning Objective: 20-05 Explain why it is important to conserve biodiversity.
6. A transferable emission permit scheme will always be superior to an emission tax when it comes to
developing an economically efficient carbon pricing scheme.
FALSE
Accessibility: Keyboard Navigation
Difficulty: Easy
Field - Chapter 20 #6
Learning Objective: 20-01 Describe desirable design features of GHG pricing policies.
7. Developing a carbon pricing scheme with stable and predictable emission prices is an important
design goal for policymakers to keep in mind.
TRUE
Accessibility: Keyboard Navigation
Difficulty: Easy
Field - Chapter 20 #7
Learning Objective: 20-01 Describe desirable design features of GHG pricing policies.
8. If permits are distributed through an auction, governments can recycle the revenue in the form of tax
cuts to offset some losses experienced by firms.
TRUE
Accessibility: Keyboard Navigation
Difficulty: Easy
Field - Chapter 20 #8
Learning Objective: 20-02 Explain how design principles apply to examples of emission trading.
9. Carbon offsets result in either the same level of emission reduction at lower cost than in a system
without them, or greater emissions reduction at the same cost because the offset works like a
withdrawal of allowances from the market.
TRUE
Accessibility: Keyboard Navigation
Difficulty: Easy
Field - Chapter 20 #9
Learning Objective: 20-02 Explain how design principles apply to examples of emission trading.
10. The revenue from B.C.'s carbon tax flows back to households and industry in the form of cuts to
personal and corporate income tax rates, tax credits for low income and rural households, and some
property tax relief for industry.
TRUE
Accessibility: Keyboard Navigation
Difficulty: Easy
Field - Chapter 20 #10
Learning Objective: 20-03 Describe the features of Canadian GHG policies and how they use carbon pricing.
11. Canada's implicit carbon tax rates that are below those of the United States but higher than those in
Europe.
FALSE
Accessibility: Keyboard Navigation
Difficulty: Easy
Field - Chapter 20 #11
Learning Objective: 20-03 Describe the features of Canadian GHG policies and how they use carbon pricing.
12. Large multinational firms saw the potential for profits by developing substitutes for CFCs which
helped with phasing out its use.
TRUE
Accessibility: Keyboard Navigation
Difficulty: Easy
Field - Chapter 20 #12
Learning Objective: 20-04 Explain how international agreement was reached to eliminate CFCs and how price incentives helped achieve the goal.
13. International embarrassment is enough of a deterrent to prevent the development of a black market in
CFCs.
FALSE
Accessibility: Keyboard Navigation
Difficulty: Easy
Field - Chapter 20 #13
Learning Objective: 20-04 Explain how international agreement was reached to eliminate CFCs and how price incentives helped achieve the goal.
14. Biological diversity is a high priority for people who are struggling to get enough resources to achieve
some degree of economic security.
FALSE
Accessibility: Keyboard Navigation
Difficulty: Easy
Field - Chapter 20 #14
Learning Objective: 20-05 Explain why it is important to conserve biodiversity.
15. It is important to preserve biodiversity because genetic diversity from wild species can add value to
agricultural breeding programs.
TRUE
Accessibility: Keyboard Navigation
Difficulty: Easy
Field - Chapter 20 #15
Learning Objective: 20-05 Explain why it is important to conserve biodiversity.
16. Habitat maintenance is not essential for preserving biodiversity because breeding programs at zoos
and agricultural research stations are adequate for this purpose.
FALSE
Accessibility: Keyboard Navigation
Difficulty: Easy
Field - Chapter 20 #16
Learning Objective: 20-05 Explain why it is important to conserve biodiversity.
17. List the six desirable design features for creating an economically efficient carbon pricing scheme.

From the perspective of economic efficiency, desirable design features for carbon pricing schemes
include: 1) comprehensive coverage of emissions; 2) a uniform price applied to all emissions; 3) stable
and predictable emission prices; 4) emission prices that are aligned with environmental damages or
climate stabilization goals; 5) maximizing the impact of the fiscal dividend; and 6) using carefully
targeted compensation schemes for vulnerable households and firms.

Difficulty: Easy
Field - Chapter 20 #17
Learning Objective: 20-01 Describe desirable design features of GHG pricing policies.
18. List four design principles that economists recommend for setting up a cap-and-trade system.

Economists studying cap-and-trade systems have developed the following principles to help design
the system: 1) cover a broad base of emitters with a cap set at the targeted level of emission reduction;
2) auction as high a percentage of the allowances as possible to ensure efficiency and obtain revenue
needed to address equity issues; 3) minimize price volatility; and 4) use offsets, but take care with
their design.

Difficulty: Easy
Field - Chapter 20 #18
Learning Objective: 20-02 Explain how design principles apply to examples of emission trading.
19. List and briefly explain the five criteria that should be satisfied to establish an effective offset system
that leads to real emission reductions.

The five criteria include: 1) making sure there is certainty in the measurement and monitoring of
emission reductions or sequestration; 2) verifying that the emission reductions backing the offset
would not have occurred in the absence of the cap-and-trade system; 3) making sure the baseline
level of emissions from the offsetting source is appropriately measured; 4) minimizing leakage in the
form of shifts in emissions outside the market boundaries; and 5) ensuring that any reversals in the
form of subsequent releases of carbon from the offsetting source are themselves offset or covered by
allowances.

Difficulty: Moderate
Field - Chapter 20 #19
Learning Objective: 20-02 Explain how design principles apply to examples of emission trading.
20. Using an example, discuss why economists are leery of using a fuel content rule that mandates
using a certain percentage of renewable fuel content to try and achieve greenhouse gas emission
reductions.

Although this policy sounds like it will help reduce GHG emissions, it is possible it will cause
emissions to rise. One has to look at the life cycle of production of the renewable fuels to estimate net
impact on GHGs. For example, comparing ethanol to biofuels produced from waste grease it has been
shown that ethanol production increases GHG emissions while biofuels successfully reduce them. The
reason ethanol is unsuccessful is the fact that it is derived from corn which requires a lot of fertilizer
to grow. Fertilizer requires a lot of energy from fossil fuels in its production and if this energy comes
from the burning of coal, it will generate a lot of GHG emissions.

Difficulty: Moderate
Field - Chapter 20 #20
Learning Objective: 20-03 Describe the features of Canadian GHG policies and how they use carbon pricing.
21. Discuss the factors that helped make the Montreal Protocol a successful international treaty.

The factors that helped make the Montreal Protocol a successful international treaty include: 1)
the link between the pollutants released and environmental damages was clearly established by the
science; 2) political leaders accepted the scientific evidence; 3) there were relatively few compounds
responsible for ozone depletion and the CFC-producing industry was made up of only a few large
chemical companies; and 4) the treaty contained a compensation method for developing countries that
made it possible for them to afford the costs of phasing out the ozone-depleting compounds.

Difficulty: Easy
Field - Chapter 20 #21
Learning Objective: 20-04 Explain how international agreement was reached to eliminate CFCs and how price incentives helped achieve the goal.
20 Summary
Category # of Questions
Accessibility: Keyboard Navigation 16
Difficulty: Easy 19
Difficulty: Moderate 2
Field - Chapter 20 21
Learning Objective: 20-01 Describe desirable design features of GHG pricing policies. 4
Learning Objective: 20-02 Explain how design principles apply to examples of emission trading. 5
Learning Objective: 20-03 Describe the features of Canadian GHG policies and how they use carbon pricing. 4
Learning Objective: 20- 4
04 Explain how international agreement was reached to eliminate CFCs and how price incentives helped achieve the goal.
Learning Objective: 20-05 Explain why it is important to conserve biodiversity. 4