Example 15 Mark Answer in Style of Edexcel Economics A

The 15 mark question for Edexcel Economics A is where I see students drop most marks.

Usually there are a few key reasons for this:

• Poor time management
• Misreading the question
• Short length of analysis or evaluation.
• Other issues.

To help my students, I have posted a model answer below. It is for a 15 mark question in style of Edexcel A Level Economics A

For more A-Level Edexcel Economics A resources, check out the links below:

Criteria

There are 9 marks available for knowledge, application and analysis (“KAA”) – detailed analysis, use of extracts and use of key economic terms.

Use a diagram where appropriate – this makes your analysis easier. If you use a diagram, make sure to refer back to it in the text.

Also there are 6 possible marks for evaluation.

There are a lot of marks for evaluation compared to the rest of section B. So you need to have detailed evaluation points.

I recommend the following structure for your answer:

• KAA 1
• Evaluation 1
• KAA 2
• Evaluation 2

Sample question

Evaluate the effects of introducing tradable pollution permits (15 marks)

Note an extract usually accompanies this question type. Here is an example excerpt from a possible extract:

Since leaving the European Union, the UK Government has replaced the EU Emissions Trading Scheme with the UK Emissions Trading Scheme (ETS). This is a tradable permits scheme. Companies have to buy permits to cover their carbon emissions and such permits can be traded. This covers power generation, industry and aviation, though some sectors do receive free permits. These schemes can incentivise firms to reduce their pollution, so they can sell their permits. Indeed for the UK firms that participated in the EU ETS before the UK left the EU, pollution fell from 236 million tonnes per CO2 equivalent to just under 130 million tonnes per CO2 equivalent.

However if there are too many permits, the price will be too low and there will be no incentive to reduce emissions – during the Covid-19 pandemic, a slowdown in economic activity has contributed to an increase in the supply of permits for the EU ETS, which could undermine efforts to reduce emissions. However expectations that the EU will have tougher pollution targets has pushed permit prices from 25 euros on average in 2020 to over 50 euros per permit as of May 2021.

[To read more about the current state of EU pollution permits, I recommend the link here]

Model answer

Tradable pollution permits are allowances for firms to pollute a certain amount, which can be bought and sold among firms. Tradable pollution permits correct the market failure caused by negative externalities from pollution. A negative externality is a harm caused to a third party not involved in a transaction. Pollution as a consequence of production leads to negative externalities. This includes breathing problems for those with asthma to warmer global temperatures rising sea levels, more frequent extreme weather events and reduced biodiversity. Pollution permits increase the cost of pollution for firms, as firms have to buy enough permits to cover their level of pollution, which reduces the incentive to pollute. Suppose the initial level of pollution is q. By reducing the number of tradable pollution permits available to q1, the supply of permits shifts left from S to S1. This means the equilibrium level of pollution falls from q to q1, reducing the level of pollution to the socially optimal level and eliminating the welfare loss associated with overpollution. For the UK firms partcipating in the EU ETS before Brexit, we saw a fall in pollution from “236 million tonnes per CO2 equivalent to just under 130 million tonnes per CO2 equivalent”, as we would expect from the permit system.

This depends on the number of permits set. If the number of permits is set too high, the level of pollution will not fall to the socially optimal level. So the welfare loss from the overproduction because of the externality will still be large. The European Union’s Emissions Trading Scheme initial phase saw an oversupply of permits, keeping the permit price very low and reducing the incentives for firms to cut emissions. More recently there has also been oversupply because of the economic slowdown relating to the Covid-19 pandemic. In this case, emission reduction will not take place to the same degree.

Permits benefit firms who can sell the permits. Assume the permits are given out for free by the government, based on past emissions for example. Then there may be some firms who can cut emissions for little cost, for example by switching to a renewable energy source that does not pollute as much, such as solar energy. These firms gain higher total revenue and profits from selling permits, if the permit revenue exceeds the cost of investing in emission reduction. Higher profits may be used to reinvest further in energy efficiency, further reducing pollution and the extent of any negative externality. For any firm there is now an incentive to reduce emissions so that they do not have to buy more permits or so they can sell permits. The permit system encourages firms who find it cheaper to reduce their pollution to do so. But firms who find it costly to reduce their pollution do not have to reduce their pollution as much and can instead buy more permits. This means pollution is reduced while incurring the least cost overall to firms. With permit prices increasing to over 50 euros in May 2021 from 25 euros in 2020, this will increase the incentive to cut emissions even more.

However for some firms there is a significant increase in costs from having to buy more permits to cover their emissions. These are firms where the production process may require a particular type of energy. This may include, for example, the energy intensive industries such as steel and some types of paper. Moreover, because these firms face higher costs, they may see reduced profits. This means less funding for these firms to reinvest into energy efficiency measures, keeping pollution high. Instead of reducing their pollution, these firms may choose to move abroad to countries without a pollution permit regime, so that production is cheaper. This would mean no reduction in global emissions but the loss of employment and jobs domestically.

Commentary

This answer features the key components of a high scoring answer. Specifically the answer contains:

• Solid chains of analysis including a relevant graph.
• Use of application based on the extract.
• Good use of key economics terms (such as externality).
• Developed evaluation points.

Note there is no need for a conclusion in a 15 mark question.

As a result, this answer is likely to score full marks or close to it.

For a model answer for a 12 mark or 8 mark question, check out these links below:

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