14 The Clean Development Mechanism of the Kyoto Protocol ind

14. The Clean Development Mechanism of the Kyoto Protocol indicates that …

1) Developed countries can obtain credit for financing emissions reductions in developing countries 2) Developed countries can obtain credit for financing emissions reductions in other developed nations 3) Developed countries can obtain credit for financing adaptation policies 4) Developed countries can trade carbon permits to developing countries 5) Developed countries can purchase extra credits if they exceed their targets

15. A carbon tax, without any other tax changes, would be …

1) Distributionally neutral 2) Revenue neutral 3) Progressive 4) Regressive 5) Inefficient

No Explanation needed

Solution

14. The Clean Development Mechanism of the Kyoto Protocol indicates that Developed countries can purchase extra credits if they exceed their targets. So the correct option is D. This is because CDM is to assist developed country parties in achieving compliance with part of their quantified emission limitation and reduction commitments under Article 3.

15. A carbon tax, without any other tax changes, would be regressive. Carbon taxes can be a regressive tax, in that they may directly or indirectly affect low-income groups disproportionately. The regressive impact of carbon taxes could be addressed by using tax revenues to favour low-income groups. From an economic perspective, carbon taxes are a type of Pigovian tax.