Saved ows cutrent carbon emissions and the cost of reducing carbon emissions for

Question

Saved ows cutrent carbon emissions and the cost of reducing carbon emissions for three industrial firms. The government ntroduces a cap-and-trade policy to regulate carbon emissions. The total cap on emissions i recelves an initial allocation of tradable permits for 60 tons of carbon emissions. s 180 tons of carbon, and each firm Current carbon enissions Cost of reducing emissions by 1 ton ($) Firn (t 200 a. Firm A wil Lolickto select,Firm C Flrm B wil Instructions: Round your answer to the nearest whole number b. To break even, the selling firm must rece

Explanation / Answer

Since  Firm C has lowest cost of abatement, it can be sell its permits to firm A and firm B.

a. Firm A will buy 20 permits from Firm C.

Firm B will buy 40 permits from Firm C.

But firm C will need to contain 10 tons of emission. Hence, its cost will be 10*50 = $500.

b. To break even, selling firm must receive $500.

Firm Current emission Per ton cost Emission cut needed A 80 150 20 B 100 200 40 C 70 50 10

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