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Impact of Climate Change on Carbon Pricing: Shadow and Market Prices


As an undergraduate Economics teacher, you can use this set of computer-based tools to teach the concept of Carbon Pricing and the instruments to implement it- Carbon Tax and Cap-and-Trade/Emissions Trading System (ETS). This lesson plan includes a resource to help students understand the importance of shadow price in the cost-benefit analysis of carbon pricing. This will enable students to understand howcarbon emissions, one of the drivers of climate change, are affecting global economics.

Thus, the use of this lesson plan allows you to integrate the teaching of a climate science topic with a core topic in Economics.

Learning Outcome

The tools in this lesson plan will enable students to:

  1. Explain the concept and importance of pricing carbon
  2. Evaluate carbon pricing as an instrument for climate policy packaging
  3.  Describe shadow prices in environmental economics
  4. Distinguish between shadow price, social cost and market price
  5. Define discount rate, marginal abatement costs and statistical value of life

A teacher-contributed lesson plan by Megha Jacob, Jesus and Mary College (Delhi University), India.

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Mapped Sustainable Development Goal(s), apart from 4 and 13


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