An electric utility may choose to invest in a new technology for controlling emissions rather than engage in permit trades. If MAC2 represents the new technology, how much will the polluter save at E1 compared to staying on its initial MAC,?

An electric utility may choose to invest in a new technology for controlling emissions rather than engage in permit trades. If MAC2 represents the new technology, how much will the polluter save at E1 compared to staying on its initial MAC,?

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

6 Please show me how the calculation for this is done in a detailed explanation please!

Incentive to Invest in New Technology Rather than
Trade Permits
An electric utility may choose to invest in a new technology
for controlling emissions rather than engage in permit
trades. If MAC2 represents the new technology, how much
will the polluter save at El compared to staying on its initial
MAC,?
MAC
What if there is a trade at price P,?
Gains with or without trade from the New Technology?
MAC2
Po
d
E3
E1
E2
Eo
18
Emissions

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