Reading: Pollution Permits and Opportunity Costs

A reading by Holt et al. in the International Review of Economics Education, provided by The Economics Network, UK, that can be used for a classroom/laboratory activity to teach your students to identify and account for opportunity costs in production decisions.

Students will learn about opportunity costs and tradable emission permits as a part of the cap and trade scheme. They will also learn of challenges in decision-making through a role-playing activity in which the students get to set production quantities within the limits of their emissions permits. 

Use this tool to help your students find answers to: 

1. Define the following:
   1. Opportunity Cost
   2. Production Cost
   3. Cap and Trade
   4. Pollution/Emissions Permit
2. What are the advantages and disadvantages of using tradable emissions permits in the context of climate change?

About the tool

Tool Name	Teaching Opportunity Cost in an Emissions Permit Experiment
Discipline	Economics
Topic(s) in Discipline	Opportunity Costs, Consumer Choices, Fixed Market price, Tradable Pollution/ Emission Permits, Emission Permit Allocation, Cap and Trade Schemes, Carbon Emissions
Climate Topic	Energy, Economics and Climate Change
Type of tool	Reading (pp 34 – 42)
Grade Level	Undergraduate
Location	Global
Language	English
Translation
Developed by	Charles Holt, Erica Myers, Markus Wråke, Svante Mandell and Dallas Burtraw
Hosted at	International Review of Economics Education, provided by The Economics Network, UK
Link	Link
Access	Online/Offline
Computer Skills	Basic