Company A has an annual carbon emission at 80,000 tCO2e. The cost for reduction is $5 per tCO2e. The possible emission reduction is 10%. Company B has an annual carbon emission at 90,000 tCO2e. The cost for reduction is $10 per tCO2e. The possible emission reduction is 10%. Companies A and B have an agreement that if either company has emission reduction in surplus, one company would sell the excess to each other at $8 per tCO2e. Now, the government only gives them 75,000 emission allowances. Each allowance represents the right to emit 1 tCO2e. The market price of 1 allowance is $9. Determine the cost of emission reduction for both companies if there is no emission trading mechanism. Describe how the companies can do to get benefits from emission trading.
Company A has an annual carbon emission at 80,000 tCO2e. The cost for reduction is $5 per tCO2e. The possible emission reduction is 10%.
Company B has an annual carbon emission at 90,000 tCO2e. The cost for reduction is $10 per tCO2e. The possible emission reduction is 10%.
Companies A and B have an agreement that if either company has emission reduction in surplus, one company would sell the excess to each other at $8 per tCO2e.
Now, the government only gives them 75,000 emission allowances. Each allowance represents the right to emit 1 tCO2e. The market price of 1 allowance is $9.
Determine the cost of emission reduction for both companies if there is no emission trading mechanism. Describe how the companies can do to get benefits from emission trading. Calculate the possible benefits if any.
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