The government wants to reduce carbon emissions arising from domestic fossil-fuel (gas) home heating.
Which one of the following combinations of policies would be most likely to achieve this objective?
Subsidise the domestic installation of heat pumps and subsidise the consumer price of natural gas.
Build more gas-fired power stations and reduce the insulation requirements for new residential buildings.
Levy a tax on the manufacture of inefficient gas boilers and use the receipts to subsidise home insulation and heat pump installations.
Impose a carbon levy on all domestic energy bills and use the receipts to lower VAT on gas-fueled heating systems.
378 exam-style questions on AQA A Level Economics 1.8 The market mechanism, market failure and government intervention in markets, covering 1.8.1 How markets and prices allocate resources, 1.8.2 The meaning of market failure, 1.8.3 Public goods, private goods and quasi-public goods, 1.8.4 Positive and negative externalities in consumption and production, 1.8.5 Merit and demerit goods, 1.8.6 Market imperfections, 1.8.7 Competition policy (A-level only), 1.8.8 Public ownership, privatisation, regulation and deregulation of markets (A-level only), 1.8.9 Government intervention in markets, and 1.8.10 Government failure. Each one has a worked solution and a mark scheme showing where the marks go.