2. Suppose that under the terms of an international climate change agreement the U.S. is compelled to reduce CO2 emission by 200 million tons and Brazil is compelled to reduce their emission by 50 million tons for a total world reduction of 250 million tons. Below are the different policy options that are available to both the U.S. and to Brazil to reduce their emissions: Po A: Efficient machinery B: Reforestation C: Rcplace coal-fucled power Total Emissions Reduction illion tons carbo 60 40 120 Cost (S Billion) 12 20 30 Total Emissions Rcduction fillion tons carbo 50 30 40 Cost (S Billion 20 Policy C A: Efficient machinery B: Protection of Amazon forest c eplace coal-fueled power Which policies are most efficient for each country in meeting their resource targets? How much will be reduced using independently? Assume that any of the policy options can be partially implemented at a constant marginal cost. For example, the U.S. could choose reduce carbon emissions with efficient machinery by 10 million tons at a cost of $2 billion. (Hint: Start by getting the average cost for each policy.) a. each option, and at what cost, if the two countries must operate b. Suppose a market of transferable permits allows the U.S. and Brazil to trade permits to emit CO2. Who has an interest in buying permits? Who has an interest in selling permits? What agreement can be reached between the U.S. and Brazil so that they can meet the overall emissions target of 250 million tons at the least cost? Can you estimate a range for permit to emit one ton of carbon? the price of a