ECON 260 Lecture : ECON-260-Chapter11.pdf

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blackhamster598

5 Oct 2012

School

Simon Fraser University

Department

Economics

Course

ECON 260

Professor

Chris Bidner

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Document Summary

Example 1: a tax on the carbon emissions from vehicles. Polluters will emit as long as the tax mac, or until the tax = mac at et. tax. Polluters pay the tax bill plus the abatement costs, the total compliance costs, which is a + b. Mac = 50 - 0. 5e tax = . At e* where tax = md = mac. Standards because the total compliance costs are only tac. Q* qm q e* emax e: emax occurs when the market produces qm, e* occurs when the market produces q*. Net social benefit from a tax: if the tax is set such that emissions decrease from emax to e*, the net social gain will be. Td (benefit) tac (cost): the cost to the firm of the tax bill is not considered a cost to society - it is a transfer payment.

Related Questions

Consider the problem of carbon dioxide emissions. We will abstract from the complexity of the problem slightly, assuming there are polluters and consumers in two regions, the OECD (O) and the rest of the world (R). Suppose the marginal cost of controlling CO₂ emissions is $13 per ton. Let the marginal willingness to pay for pollution reduction be 14 - Q for region O and 8 - 2Q for region R, where Q is the amount of pollution reduction.

The United Nations is considering two proposed methods for controlling CO2 emissions, both involving polluters paying for the damage they cause:

Proposal A involves the polluters paying damages to each region for the pollution generated.

Proposal B involves the polluters in each region independently negotiating pollution reductions with the consumers of their respective region, assuming the other region is not undertaking pollution reduction.

What is the socially efficient level of emissions reduction Q*? A graph of the marginal abatement cost and the total marginal willingness-to-pay curves would be helpful. (Hint: CO2 emission reduction is a global public good)

How much total pollution reduction will occur under Proposal A and what will be the total compensation received by regions O and R? If those payments were instead placed in the general coffers of the UN, would the outcome be any different from an efficient point of view? Why or why not?

How much pollution would be generated under Proposal B? Explain any differences between this answer and the answer to parts (a) and (b).

pinkarmadillo937

Please help me with the question below. Please explain and give the right answer.Thank you.

The following table summarizes the marginal abatement cost functions for an industry with two sources of pollution.

Source Marginal Abatement Cost

A MACA=1,200-3EA

B MACB= 800-2EB

Suppose the regulator wished to reduce total industry emissions by 25% by implementing a uniform standard.

a. What is the level of emissions and abatement at each source under the uniform standard?

b. What is the total compliance cost for the industry of the uniform standard?

c. Is this a cost-effective allocation of the industry abatement target?

3. The efficient level of emissions

a. substantially reduces the amount of pollution in the air.

b. maximizes the profit of a firm from the production and sales of its products.

c. balance marginal damages and marginal abatement costs of pollution.

d. is the maximum level of pollution allowed by the pollution control authority.

ECON 260 Lecture : ECON-260-Chapter11.pdf

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