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Upcoming in Class

Upcoming in Class. Quiz #2 Next Wednesday Homework #4 – Oct. 8th Exam #2 – Oct. 8th Extra Credit Writing Assignment Oct. 17th Writing Assignment Due Oct. 24th. Pollution Types.

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Upcoming in Class

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  1. Upcoming in Class Quiz #2 Next Wednesday Homework #4 – Oct. 8th Exam #2 – Oct. 8th Extra Credit Writing Assignment Oct. 17th Writing Assignment Due Oct. 24th

  2. Pollution Types Uniformly Mixed Pollutants – a pollutant emitted by many sources in a region resulting in relatively uniform concentration levels across the region (SOx, CO2) Non-uniformly mixed pollutants – pollutants that have different effects in different areas, depending on where they are emitted (water pollution from factories, sewage, and runoff from agriculture)

  3. Policies Standards (Non-uniformly mixed pollutants) Taxes (Uniformly Mixed Pollutants) Permits (Uniformly Mixed Pollutants)

  4. A Transferrable Pollution Permit System • Firms are allocated X number of permits • A permit represents the right to pollute 1 ton of CO2. • Firms can buy and sell permits. But firm sells their permits, they can no longer pollute and must control their pollution instead.

  5. Example – 2 Polluting Sources • Natural Gas Power Plant • 15 tons of CO2 • Suppose we determine that to maintain clean healthy air, we need to reduce emissions by 15 tons total. • Who should reduce emissions? By how much? Coal Power Plant 15 tons of CO2

  6. Cost-Effective Allocation of a Uniformly Mixed Pollutant

  7. Cost-Effective Allocation • Minimizes the control cost between the two sources • Cost Effectiveness Equimarginal Principle • Cost of achieving a given level of reduction is minimized when • MC1=MC2=MC3=..=MCX • Marginal costs of all emitters are equal

  8. Example – 2 Emitters MCcoal = 10 + ½ * Qcoal-CO2 MCng = 5 + Qng-CO2 Each firm currently emits 100 tons of CO2 The government wants the to reduce overall emissions to 150 tons of CO2 QCO2 = Qcoal-CO2 + Qng-CO2

  9. Issuing Permits Lottery (equitable) Grandfathering (politically appealing) Auction (government revenue generated)

  10. Example – 2 Emitters MCcoal = 6 + 1/3 * Qcoal-control MCng = 2 + Qng-control Each firm currently emits 100 tons of CO2 The government wants the to reduce overall emissions to 140 tons of CO2 Qcontrol = Qcoal-control + Qng-control

  11. Suppose a tax of $30 is implemented instead What is the control cost to each firm? What is the revenue to the government?

  12. Upcoming in Class Quiz #2 Next Wednesday Homework #4 – Oct. 8th Exam #2 – Oct. 8th Extra Credit Writing Assignment Oct. 17th Writing Assignment Due Oct. 24th

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