You are an economic policy adviser for a federal opposition politician. She wishes to deepen her understanding of the recent environmental legislation brought into effect by the government, specifically the Clean Energy Legislative Package (more commonly known as the Carbon Tax). This legislation, among other things, introduced a price on carbon on 1 July 2012. She would like you to provide her with a brief background to the issue and answers to the following questions (this will form your analysis of the issue):

You are an economic policy adviser for a federal opposition politician. She wishes to deepen her understanding of the recent environmental legislation brought into effect by the government, specifically the Clean Energy Legislative Package (more commonly known as the Carbon Tax). This legislation, among other things, introduced a price on carbon on 1 July 2012. She would like you to provide her with a brief background to the issue and answers to the following questions (this will form your analysis of the issue):
? What is the government trying to achieve by putting a price on carbon (i.e. what
are the desired outcomes)?
? What is the government seeking to correct? Define this phenomenon and
outline what must be present for it to occur in the provision of goods.
? In terms of the provision of goods, when is it appropriate for the government to
intervene in markets (e.g. by implementing a carbon pricing scheme)?
? Discuss the different ways in which governments can intervene to remove the
inefficiency pertaining to negative externalities, providing examples of where
these options have been used both in Australia and abroad. Discuss which
category the Carbon Tax falls under and explain why.
Note that you are writing this briefing in your role as an applied policy economist, not as a journalist or advocate. While you may draw your own conclusions and make recommendations, they should be based on sound economic thinking and supported by analysis. Avoid using emotive or judgmental language.