environmental economy

environmental economy.

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The following table provides information on emissions, transfer coefficients and the marginal costs of emissions reduction for a non-uniformly mixed pollutant from three different sources.

  1. Complete the table below, adding the missing information for concentration units reduced and the marginal cost of concentration reduction for each source. Please write down any formulae you use.
  1. Suppose the goal of the regulator is to reduce total concentrations at the receptor by 7.25 units. What is the optimal concentration reduction from each source in order to achieve the total required reductions? Show how you arrive at your answer.
  1. What is the total abatement cost of emission reduction for each source? What is the economy-wide total abatement cost of achieving the target?
  1. What is the optimal tax rate for each source in order to achieve the required reductions? Show how you arrive at your answer.
  1. Does your answer in part c) make sense? Explain why.
  1. How is your solution to this problem different from a typical solution in a uniformly mixed pollutant problem?
  1. Suppose that the regulator set a uniform tax of $3 per unit of emissions. How many emissions units would each source reduce under this policy? Would this policy achieve the target concentration reduction? Clearly show how you arrive at your answer.
  1. As an economist, which policy would you recommend: the non-uniform tax rate identified in part (d) or the uniform tax policy from part (g)? Justify your answer.

Emmission Units Reduced

Marginal Cost of Emissions Reduction

Concentration Units Reduced

Marginal Cost of Concentration Reduction

Source 1: transfer coefficient= 1

1

2

________

________

2

4

________

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3

6

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4

8

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________

5

10

________

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6

12

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7

14

________

________

Source 2: transfer coefficient= .75

1

2

________

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2

4

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3

6

________

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4

8

________

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5

10

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6

12

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7

14

________

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Source 3: transfer coefficient= .5

1

2

________

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2

4

________

________

3

6

________

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4

8

________

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5

10

________

________

6

12

________

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7

14

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environmental economy

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