Extract 1: The UK Emissions Trading Scheme (UK ETS) caps total emissions from power, heavy industry and aviation. Firms must hold an allowance for each tonne of CO₂ they emit; allowances can be bought and sold. The carbon price in the UK ETS fell from about £80 per tonne in 2022 to around £35 per tonne in 2024.
Extract 2: The cap is reduced each year. A firm emitting 200 000 tonnes of CO₂ but holding free allowances for 150 000 tonnes must buy the rest. Some heavy industries argue that high carbon prices make them uncompetitive against producers in countries without carbon pricing, and could move production abroad ('carbon leakage'). The UK plans a carbon border adjustment mechanism from 2027.
Extract 3: Economists estimate the social cost of carbon at well above £35 per tonne. Some argue for a simple carbon tax instead of trading, or for more direct regulation and subsidies for green technology.
11 mark
The basic economic problem arises because:
21 mark
Traditional economic theory assumes that consumers aim to maximise:
31 mark
Which would shift the demand curve for coffee to the right?
41 mark
Supply rises from 200 to 260 units when price rises by 20%. PES is:
51 mark
Producer surplus is the difference between:
61 mark
Which feature is characteristic of monopolistic competition?
71 mark
Allocative efficiency occurs where:
81 mark
A perfectly contestable market has:
91 mark
The demand for labour is a derived demand because it depends on:
101 mark
When MR is zero, total revenue is:
111 mark
Information asymmetry occurs when:
121 mark
Government failure occurs when intervention:
131 mark
A strength of tradable pollution permits is that they:
141 mark
The burden of an indirect tax falls mainly on consumers when demand is:
151 mark
Which is a withdrawal from the circular flow of income?
161 mark
GDP per capita is calculated by dividing GDP by:
171 mark
CPI inflation is measured using:
181 mark
Unemployment caused by a fall in AD is:
191 mark
Which is a component of aggregate demand?
201 mark
A rise in productivity is likely to shift:
211 mark
The short-run Phillips curve shows a trade-off between:
221 mark
An automatic stabiliser is:
231 mark
Which is a supply-side policy?
241 mark
Which is a cause of globalisation?
251 mark
A customs union has free trade between members and:
261 mark
A floating exchange rate is determined by:
271 mark
The main function of a central bank includes:
281 mark
Which is a function of money?
291 mark
If a bond's price rises, its yield:
301 mark
Which measure combines income, education and life expectancy?
Section B — Case study: Pricing carbon
Extract 1: The UK Emissions Trading Scheme (UK ETS) caps total emissions from power, heavy industry and aviation. Firms must hold an allowance for each tonne of CO₂ they emit; allowances can be bought and sold. The carbon price in the UK ETS fell from about £80 per tonne in 2022 to around £35 per tonne in 2024.
Extract 2: The cap is reduced each year. A firm emitting 200 000 tonnes of CO₂ but holding free allowances for 150 000 tonnes must buy the rest. Some heavy industries argue that high carbon prices make them uncompetitive against producers in countries without carbon pricing, and could move production abroad ('carbon leakage'). The UK plans a carbon border adjustment mechanism from 2027.
Extract 3: Economists estimate the social cost of carbon at well above £35 per tonne. Some argue for a simple carbon tax instead of trading, or for more direct regulation and subsidies for green technology.
314 marks
Using Extract 2, calculate how much the firm would pay for the extra allowances it needs at the 2022 and 2024 carbon prices, and comment on the difference.
329 marks
With the help of a diagram, explain how a carbon price can correct the market failure caused by greenhouse gas emissions.
3312 marks
Assess the significance of carbon leakage for UK heavy industry.
3425 marks
Using the case study and your own knowledge, evaluate whether an emissions trading scheme is the best way for the UK to reduce carbon emissions.
Finished?
Answer every question to finish (34 left), or finish when the time’s up.
Score 0 / 80 · 0 of 34 marked
This paper is written by Plasmo in the style of the OCR A-Level Economics exam. It is not a past paper and is not produced or endorsed by the exam board.
OCR A-Level Economics Mock Exam: Paper 3: Themes in economics | Plasmo