Car emissions - class exercise

# Car emissions - class exercise - Barbara Spencer...

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Barbara Spencer Environmental Solutions EXAMPLE: Car Emissions . There are 100 cars, 50 old and 50 new, which emit 7 in units of 1000 ppm (parts per million) in the absence of regulation. The marginal cost of reducing emissions increases as total emissions fall. It is more costly to reduce emissions for old cars. Table: Marginal cost of reducing emissions by 1 unit (1000 ppm) Reduction in emissions: 7 to 6 6 to 5 5 to 4 4 to 3 MC for Old car \$90 \$110 \$130 \$150 MC for New car \$55 \$75 \$95 \$115 e.g. It costs \$90 (\$55) to reduce the emissions of an old (new) car from 7 to 6. It costs \$110 (\$75) to further reduce the emissions of an old (new) car from 6 to 5. The marginal cost of reducing emissions for an old car from 7 to 5 is \$200 (\$90 + \$110). 1. Standards (current law). Consider the effect of a standard of 5 (units of 1000 ppm). What is the total reduction in emissions and what is the total cost to society (resource cost) of this reduction? 2. Taxes.

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## This note was uploaded on 02/14/2010 for the course COMM 296 taught by Professor Dasgupta during the Fall '08 term at The University of British Columbia.

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Car emissions - class exercise - Barbara Spencer...

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