Question

Minnesota has two oil refineries that emit methane gas. The Bend refinery emits 300 units of methane and the Park refinery emits 900 units of methane. Government regulators would like to reduce total methane emissions from 1,200 to 900 units. Bend’s total abatement cost is TCB = 400QB + 4QB 2 where Q is units of methane. Park’s total abatement cost is TCP = 40QP + 2QP 2.

a. Suppose that government regulators require each refinery to remove 150 units of methane. What is the total cost of removing these 300 units (TCB + TCP)?

b. Now suppose that the government regulators evenly split 900 methane pollution permits between the two refineries. What is the total cost of removing 300 units of methane, using a tradable permit system?

Answer 1

Solution

answered by: anonymous