Discuss the pros and cons of the followingmethods for distributing the initial allocationof permits when the permits are tradable: (i))equal allocation to all firms, (ii) allocationproportional to current emissions, (iii) auctionof permits.Consider the impact on efficiency of the policy(both static and dynamic where dynamicrefers to the encouragemnt of newtechnology), equity or the distribution of thebenefits of the program, and the governmentbudget.

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Discuss the pros and cons of the following methods for distributing the initial allocation of permits when the permits are tradable: (i)) equal allocation to all firms, (ii) allocation proportional to current emissions, (iii) auction of permits.

Discuss the pros and cons of the following methods for distributing the initial allocation of permits when the permits are tradable: (i)) equal allocation to all firms, (ii) allocation proportional to current emissions, (iii) auction of permits.

Micro Economics For Today

10th Edition

ISBN:9781337613064

Author:Tucker, Irvin B.

Publisher:Tucker, Irvin B.

Chapter14: Environmental Economics

Section: Chapter Questions

Problem 17SQ

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Plants A and B emit 12 tons and 6 tons of carbon dioxide (CO2), respectively. MAC(marginal abatement costs) for a = 12 - Ea, MACb=12-2Eb MD(marginal damage) = 1/3*E (E indicates CO2 emission) Suppose that the emission trading system is introduced and the right to emit 7 tons is given to power plant A and the right to emit 5 tons is given to power plant B. At this time, explain how the price of CO2 credits is determined and how much each power plant buys or sells.
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In a cap-and-trade program that covers only two firms, suppose Firm A has linear marginal abatement costs that are twice as high as Firm B’s linear marginal abatement costs. Permits are handed out so that both firms need to reduce their emissions to meet their cap. With the initial allocation of permits, Firm A and Firm B are each required to do half of the total required abatement. Given this starting point: a.) Neither firm will be seeking to buy permits, because the initial allocation happens to be the least-cost allocation of abatement responsibility. b.) Firm A will be seeking to buy permits and Firm B will be willing to sell some. c.) Firm B will be seeking to buy permits and Firm A will be willing to sell some. d.)Both firms will be seeking to sell permits.
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Please solve this question Construct framework for new and effective private sector tourism policies thatencompass social, environmental and economic impacts?