A fixed government price per ton of emitted greenhouse gas
Explication
A carbon tax rate is a fixed per-ton government charge on greenhouse gas emissions. The other options describe features of trading systems or caps, not a tax rate.
Demand elasticity and the degree of cost pass-through
Explication
Carbon tax effectiveness depends on the tax rate, demand elasticity, and how much firms can pass costs to consumers. The other choices relate more to ETS design than to tax effectiveness.
A compliance market created under law that uses tradable allowances
Explication
An ETS is a legal compliance market that reduces emissions through tradable allowances. It is not a fixed tax or a voluntary program.
Buy enough allowances for verified annual emissions and surrender them to the regulator
Explication
Covered entities must obtain allowances matching verified annual emissions and surrender them for compliance. The other options do not describe the standard compliance obligation in an ETS.
To reduce emissions by shrinking the number of permits over time
Explication
A periodic declining cap lowers total permitted emissions by reducing permit supply each year. That creates scarcity and pushes firms toward reductions.
Because firms may find abatement cheaper than buying scarce permits
Explication
When permits are scarce, their price can rise until firms prefer investing in abatement rather than buying more allowances. The other options do not explain the price effect of scarcity.
A forward-looking set of carbon prices generated through derivatives contracts
Explication
A forward curve is created by derivatives contracts and reflects expected future carbon prices. It is about future price expectations, not the cap schedule itself.
It can create economies of scale and access to lowest-cost abatement opportunities
Explication
Linking markets expands the trading pool, which can lower costs and expose more low-cost abatement opportunities. The other choices are not stated benefits of linking.
EU ETS
Explication
EU ETS is named as a major active emissions trading program. The other options are not listed programs.
Swiss ETS
Explication
Swiss ETS is identified as having been developed independently before linking with the EU. The other programs are not described that way in the source material.
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Carbon tax rate — definition?
Fixed government price per ton of emissions.
Emission trading system (ETS) — role?
Creates a compliance market using tradable allowances.
Cap-and-trade — mechanism?
Sets a declining permit cap and allows trading.
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