If the allowances can be traded and the market price of allowances is $50 per ton, whichpolluter will buy allowances, and which one will reduce emissions and sell allowances tothe other? How much will be the total abatement cost?

Two firms, A and B, each currently emit 100 tons of chemicals into the air. The government has decided to reduce the pollution and from now on will require a pollution permit for each ton of pollution emitted into the air. The government gives each firm 40 pollution permits, which it can either use or sell to the other firm. It costs Firm A $200 for each ton of pollution that it eliminates before it is emitted into the air, and it costs Firm B $100 for each ton of pollution that it eliminates before it is emitted into the air. After the two firms buy or sell pollution permits from each other, we would expect that Firm A will emitGroup of answer choices20 fewer tons of pollution into the air, and Firm B will emit 100 fewer tons of pollution into the air.100 fewer tons of pollution into the air, and Firm B will emit 20 fewer tons of pollution into the air.20 more tons of pollution into the air, and Firm B will emit 100 fewer tons of pollution into the air.50 fewer tons of pollution into the air, and Firm B will emit 50 fewer tons of pollution into the air.

Suppose a factory emits greenhouse gases from its chimney. Currently, the factory does not abate emissions at all. If it were to abate, its marginal abatement cost curve is MAC = 225 - 5E. The residents of a nearby town are impacted by the pollution and face marginal damages of $4 per unit of emissions MD = 4E. 1. What is the unabated level of emissions? 2. What is the socially optimal level of pollution? 3. Compute the total damages at the socially optimal level. 4. Compute the total abatement cost at the socially optimal level.

When there is uncertainty over the marginal cost of pollution abatement, explain when a tax on pollution is preferable to quantity regulation

Q9 There are three industrial firms in Happy Valley.The government wants to reduce pollution to 60 units, so it gives each firm 20 tradable pollution permits. Firm: A, B, C Initial pollution level: 30,40,20 Cost of reducing pollution by one unit: 20, 30, 10 Q10 a) Who sells permits and how many do they sell? Who buys permits and how many do they buy? Briefly explain why the sellers and buyers are each willing to do so. What is the total cost of pollution reduction in this situation? b) How much higher would the costs of pollution reduction be if the permits could not be traded?

Assume an economy has only two polluters, one airline and one power plant. Last year, theairline emitted 4000 tons of CO2 and the power plant emitted 6000 tons of CO2. It is predictedthat the airline and the power plant’s CO2 emissions will not change next year if no emissionmitigation policy is implemented. The regulator will implement ETS next year. The schemewill take the last year as the baseline year and will grandfather all the allowances according tothe baseline emissions. The policy target is to cut 10% of CO2 emission. The marginalabatement cost (MAC) of the airline is $60 per ton of CO2 and the MAC of the power plant is$40 per ton.(a) How many allowances will be allocated to the airline and the power plant respectively