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  •  Market failure and government intervention

Click to read the article below and then answer the questions:

Windfalls for heavy industry in EU carbon scheme are a moral hazard

  • Watch this video and then explain how the EU’s Emissions Trading System (ETS) operates

  • The ETS works on a ‘cap and trade’ principle. Using a demand and supply diagram, analyse how the cap and trade ETS can reduce emissions over time

  • Define moral hazard

  • Outline the reasons why ‘windfalls for heavy industry in EU carbon scheme are a moral hazard.’

Gavin Clarke, Emmanuel College

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