The carbon tax can be introduced when:

Question

Quizplus · Accepted Answer

The carbon tax is introduced to address the externality of carbon emissions, where the social cost of emissions is not reflected in market prices. This occurs when the external cost of production is not accounted for in the market prices. The introduction of a carbon tax encourages producers to adopt emissions reduction technologies to avoid paying the tax. Therefore, option D is a consequence of the introduction of carbon tax, rather than a prerequisite. Options A and C are not related to the introduction of a carbon tax.

The Carbon Tax Can Be Introduced When