ETS + Ctax
CAP in general
Is there any other main specific topics we need to be able to evaluate?
I have just realised i dont think i even know what CAP is...
some potential answers for q4 on tutor2u mock (not sure if i'm right so correct me if im wrong):
1. increased use of food (land to produce food) for biofuel production ---> reduced supply of food ---> higher food prices ---> negative impact on those on low incomes as food (a necessity) is now more costly to consume.
2. Increased supply of biofuels ---> price of biofuels decreases ---> good for motorists whose cars are adopted to run on biofuels
3. Could lead to fall in oil prices due to increased availability of substitutes (biofuels in this case) ---> fall in demand for oil ---> bad for oil rich/dependant nations such as Saudi Arabia etc.
4. Creation of jobs in primary sector i.e. agriculture.
5. Biofuels still create CO2, and hence are not a complete solution to the negative externalities caused by motoring - Biofueld produce 1.7 times more CO2 (including in the production of it)
A good point to stick in the essays every now and then is that inflation might not be as bad as initially thought. It might reflect an improvement in quality due to genetic modification of plants etc. It is not inflation adjusted to quality.
'the fall in price may offset the fall in emissions they are meant to achieve; (as you quoted 1.7 times worse than diesel) - you lost me at that point, i don't get it
If the right questions come up we should be OK. Just got to hope they don't **** us over.
How does 'Reduction in negative externalities, limiting extent of market failure.' arise from the EU biofuels policy????
Here's what I've got so far for question 4 on the tutor2u mock. People feel freee to edit or expand on it!
The EU and US biofuels policy has both positive and negative consequences on the global economy. Lets start off with some of the advantages. The biofuels policy helps reduce CO2 emissions in line with the Kyoto protocol, and increases the production of more carbon neutral forms of transport. This reduces the negative externalities associated with heavy CO2 emitting activities, thus limiting the extent of market failure (draw negative externality diagram with deadweight welfare loss to society reduced?). Secondly, due to the increased supply of biofuels through subsidisation the price of biofuels will decrease. This is beneficial to those motorist who’s transportation methods are adapted to run on biofuels. Thirdly, there may an increase in employment opportunities in the primary sector i.e. agriculture, due to the fact that more workers will be needed to cultivate the biofuels. This can have multiplier effects such as increased consumption, a reduction in unemployment benefits, an increase in government tax revenue which could be hypothecated for research into ‘cleaner’ technology, or even subsidised to provide firms themselves with the ‘cleaner’ technology.
Now, lets explore some of the disadvantages with the EU and US biofuels policy. Firstly, oil prices could decrease, due to the increase in the availability of substitutes (biofuels in this case). The could reduce the demand for oil, which will have negative consequences especially on oil dependant countries such as Saudi Arabia, where revenue gained for exporting oil is a major contributor to the capital inflows? However, the fall in oil prices could be seen as advantageous, as it could lower firms’ costs of production (e.g. transportation costs). If firms pass these lower costs to consumers in the form of cheaper prices, food prices will fall and those on lower incomes will be able to purchase more food, or healthier non-processed food. This will have positive consequences such as a healthier more productive workforce, an increase in GDP etc. Secondly, biofuels still create CO2, hence are not a complete solution to the negative externalities caused by motoring. Thirdly, extract 4bii says that biofuels produce nitrogen oxide, which is 300 times more powerful than CO2 and 1.7 times the effect of diesel, thus is still harming the environment by maintaining/increasing the rate of global warming. Lastly, if the price of biofuels falls, there will be an increase in demand, ceteris paribus. This is good for biofuel farmers, although if demand increases by an excessive amount (due to farmers increasing supply and lower prices) it is going to cause even more pollution due to the fact that is cheap and therefore lots of people can buy lot of it. However this is dependant on the elasticity of the product, for example petrol (a close substitute of biofuels) has inelastic demand, thus demand is not very responsive to a change in the price.