Upcoming in Class Homework #3 Due Monday (Sept. 21) Quiz #2 Wednesday Writing Assignment Due Oct. 23rd
Transcript
Slide 1
Homework #3 Due Monday (Sept. 21) Quiz #2 Wednesday Writing
Assignment Due Oct. 23rd
Slide 2
Assume the marginal cost of controlling a pollutant is
constant, i.e., it does not vary with the level of output, and the
marginal damage cost associated with this same pollutant increases
at a constant rate. A) Illustrate this situation graphically and
identify the cost-minimizing level of the pollutant.
Slide 3
B) Now assume that as a result of a change in market
conditions, the cost of one of the inputs (which accounts for 25
percent of marginal abatement costs) to pollution control doubles,
ceteris paribus. Graphically illustrate the effect of this change
on the efficient quantity of the pollutant.
Slide 4
C) Does your conclusion in part b) make economic sense? Why or
why not? D)Identify the area in your graph for part b) that
represents the change in total pollution costs attributable to the
increase in the cost of the input to pollution control.
Slide 5
Based on Horizontal and Vertical Zonal Characteristics, how
would you classify the following pollutants (ie. Local vs.
Regional, Surface vs. Global) BP Oil Spill in the Gulf of Mexico
Cigarette Buds outside Stevenson Hall Vermilions coal-fired power
station leaking coal ash from its ash ponds CO2 Emissions in the
World Polychlorinated Biphenyls (PCBs) in Lake Michigan by the
Outboard Marine Corp.
Slide 6
. From the article EPAs Winding Road handed out in class,
classify the following programs as cap & trade, emissions
quota, or emissions charges, and identify the pollutant targeted.
Acid Rain Program NO X SIP Call CAIR/CATR/CSAPR RGGI Utility MACT
Rule Cooling Water Intake Rule
Slide 7
Best available control technology a pollution regulation
approach in which the government mandates that all firms use a
control technology deemed most effective.
Slide 8
A chemical factory is situated next to a farm. Airborne
emissions from the chemical factory damage crops on the farm. The
marginal benefits of emissions to the factory and the marginal
costs of damage to the farmer are as follows MB= 200 0.3 Q and
MC=100+0.1Q From an economic viewpoint, what is the best solution
to this environmental conflict of interest? How might this solution
be achieved?
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Slide 10
Set standard based on other criteria Safe for human use or
consumption Safe for human recreation Ecological health Advantages
Allows for flexibility in meeting standards Disadvantages Possibly
no incentive to go beyond the standard
Slide 11
An emission charge is a per-unit of pollutant fee, collected by
the government. Each firm will independently reduce emissions until
its marginal control cost equals the emission charge. Advantage
Market based, economic incentive Firm more efficient at controlling
pollution have a competitive advantage Revenues can be used to
lower other taxes Disadvantage determining how high the charge
should be set in order to ensure that the resulting emission
reduction is at the desired level. Taxes are generally politically
unpopular
Slide 12
Two power plants are currently emitting 8,000 tons of pollution
each. Control costs for the two plants are MC C (1)= 2Q MC C (2)=
3Q Q represents the quantity of pollution reduction.
Slide 13
Regulation requiring, each plant to control 5,000 tons A tax of
$12,000 per ton
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Suppose a new technology is discovered that can control
pollution at a lower cost. Both firms adopt this technology. MC C
=1.5 Q What is the effect of the tax now on MC, the efficient level
of Control, Total Control Cost, and Government Revenue?
Slide 16
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.
Slide 17
Coal Power Plant 15 tons of CO 2 Natural Gas Power Plant 15
tons of CO 2 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?
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Slide 19
Minimizes the control cost between the two sources Cost
Effectiveness Equimarginal Principle Cost of achieving a given
level of reduction is minimized when MC 1 =MC 2 =MC 3 =..=MC X
Marginal costs of all emitters are equal
Slide 20
MC coal = 10 + * Q coal-CO2 MC ng = 5 + Q ng-CO2 Each firm
currently emits 100 tons of CO 2 The government wants the to reduce
overall emissions to 150 tons of CO 2 Q CO2 = Q coal-CO2 + Q
ng-CO2
Slide 21
Homework #3 Due Monday (Sept. 21) Quiz #2 Wednesday Writing
Assignment Due Oct. 23rd