Demand for permits decrease as demand for companies' products decrease (no need so many permits) --> price drops, quantity stays the same.

E.g. 92% tax on e-cigarettes in Vermont, USA; previously only a standard sales tax which was cheaper than traditional cigs, ad valorem tax

international agreements, legislations, cap and trade schemes, carbon taxes, indirect taxes, educational campaigns etc.

China = one of 3 biggest CO2 emitters and faces pollution, Chinese EV companies (e.g. BYD, Nio, Xpeng) have received tens of billions of subsidies

Plastic Free Challenge to correct neg. ext. of cons. (even prod.) of using plastics; social media - inspiring selfies + images + hashtag #plasticfreechallenge

Legislations, educational campaigns, indirect taxes

New supply curve S2 will not quite be at the MSC in this case. D = MPB = MSB.

Need big subsidy before big drop in price before quantity demanded increases by a little

a situation where degradation, depletion or destruction of a common access resource is caused by rivalry and over-consumption.

Price incentive to reduce consumption, tax revenues vs. regressive, parallel markets, imperfect market info

flexibility + internalize externality vs. job losses, MNC shift production, hard to determine correct cap level

Command-and-control approach (forced to comply) vs. monitor & enforcement costs, time to implement, choose to break if penalties not high

Creates incentive + lowered prices vs. opportunity cost, difficult to calculate subsidy amount,