436 Problem Set 8 SU19.pdf - Economics 436 Summer 2019...

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Economics 436 Summer 2019 Eighth Problem Set Due July 22 nd I. Discuss the following assertion, “Even if the net present value of a policy that reduced emissions of greenhouse gases would be very large for the world as a whole, it might be negative at the national level for both highly-developed countries and less developed countries.” II. A. Briefly explain what “carbon leakage” is. No diagram required. B. Explain why the prospect of carbon leakage creates a strong incentive for countries not to join an international agreement to reduce emissions of CO 2. III. Suppose that a non-degradable pollutant will be causing $30 million dollars of annual damage forever. An analysis is prepared using a discount rate of 6% and concludes that the present value of damages over the next 100 years is $498,526,387. How much difference would it make if all future damages, rather than only those over the next 100 years, are considered? IV. Suppose that there is a set of policies that could eliminate damage from global
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