Consider the following diagram showing a marginal damage curve, a marginal abatement cost curve nd an optimal emission fee of $40 per ton. $ $90 MAC $40 $00 100 MD Tons of Emissions 180 Calculate the total dead weight loss that would result if a standard were imposed that resulted in zero emissions. (3)

PRICE (Dollars per ton) 70 63 56 49 42 35 28 + 21 T 14 7 0 Demand +++ 0 40 80 120 160 200 240 280 320 360 400 QUANTITY (Millions of tons) Graph Input Tool Daily Demand for Pollution Rights Price (Dollars per ton) Quantity Demanded (Millions of tons) 7 360 Suppose the government has determined that the socially optimal quantity of particulate matter is 120 million tons per day. One way governments can charge firms for pollution rights is by imposing a per-unit tax on emissions. A tax (or price in this case) of $ of particulate matter emitted will achieve the desired level of pollution. ? per ton Now suppose the U.S. government does not know the demand curve for pollution and, therefore, cannot determine the optimal tax to achieve the desired level of pollution. Instead, it auctions off tradable pollution permits. Each permit entitles its owner to emit one ton of particulate matter per day. To achieve the socially optimal quantity of pollution, the government auctions off 120 million…

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Consider a firm that emits pollution into the air. Suppose that the marginal damage costs associated with the emissions are given by MDC -15+ 4 c, where e is the quantity of the emissions. The firm's marginal costs of abatement are given by (a) (b) 390 (c) MAC 1200 - 20 c. Determine the quantity of emissions that the firm would discharge in the absence of government policy. Determine the socially efficient level of emissions. Calculate the total costs to society for both a and b and draw a diagram illustrating these costs.

Which of the following are practical and effective policies to deal with carbon emissions caused by driving a car? A) A quota on individuals to limit their driving B) A tax on petrol C) Ownership of all affected assets D) Coasian bargaining (one side paying the other side to drive or not to drive)

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Describe the key symmetry between a pollution emissions tax and an emissions trading scheme. Outline some reasons you might wish to choose one approach in favour of the other when dealing with an emissions-reduction problem.

$ 15 7 0 Marginal Control Costs A 50 0 150 Marginal Damages 250 Emissions (tons) | What is the benefit to society from reducing emissions from 250 tons to 150 tons?

PRICE (Dollars perton) 90 81 72 63 54 45 30 27 18 9 0 0 + I 40 60 80 100 120 140 160 180 200 QUANTITY (Millions of tons) 20 40 Demand Graph Input Tool Daily Demand for Pollution Rights Price (Dollars per ton) Quantity Demanded (Millions of tons) 9 180 Suppose the government has determined that the socially optimal quantity of chemical pollution is 140 million tons per day. Corrective taxes Tradable permits One way governments can charge firms for pollution rights is by imposing a per-unit tax on emissions. A tax (or price in this case) of S of chemicals emitted will achieve the desired level of pollution. (?) Now suppose the U.S. government does not know the demand curve for pollution and, therefore, cannot determine the optimal tax to achieve the desired level of pollution. Instead, it auctions off tradable pollution permits. Each permit entitles its owner to emit one ton of chemicals per day. To achieve the socially optimal quantity of pollution, the government auctions off 140…

109 83 35 38 T B a V Y D₂ 223 634 1374 Emissions Consider the figure above if the government imposes a cap and trade system with a cap of 925 units of emissions, then what areas reprosent the total cost of abatiment? E 925 W