5. Economic advisors and environmental advocates are both pleased with the promotion of LEED-certified development and the retrofitting of existing buildings to incorporate LEED-approved carbon "scrub- bers" in order to reduce GHG emissions by new and existing commercial buildings in Canada. They often disagree, however, about the relative efficacy of using so-called "incentive-based" policies, such as emissions-permit programs, to reduce GHG emissions of all commercial buildings in a given city, relative to programs of direct regulation (so-called "commend end contro/" policies) which mandate a specific amount by which every commercial building must reduce its volume of emissions over a given period. Economists claim that the use of an emissions permit system can induce the same total decrease in emissions as a command and control regulatory mandate, but at less cost to developers, equity owners and current and future lessees in those buildings. This claim has been criticized by environmental ad- Tocates Some argue that common sense reveals the logical absurdity of a permit system while others criticize emissions permit programs as nothing more than awarding building owners "licenses to po/late," Using the numerical example represented in Table One below, based on data from Stoner, B.C., assume that two buildings, known to the locals as Buildings A and B, comprise all of the relevant commercial real estate in Stoner and together emit an intolerable volume of GHG annually. In response to public sentiment, elected city officials in Stoner now require that these buildings must reduce their joint GHG emissions in the coming year by 100, 000.00 units. Table One describes the respective costs borne by the owners of Buildings A and B in decreasing the emission levels of their respective buildings by successive 5,000 unit increments. A direct regulatory policy would require each building to reduce its emissions by 50, 000.00 units, leading to the desired joint reduction of 100, 000 units. Under an alternative emissions permit policy, the owners of each building collectively receive ten permits from city government free of charge. Possession of a single permit allows its owner to emit 5, 000 units of GHGs over the year. The owner of each building is free to buy and sell coupons from and to the owner of the other. a. What is the cost to the owner of each building of reducing its emissions by 50, 000 units to comply with a direct regulation? b. Under this direct regulatory poicy, what is the associated joint cost to both owners? c. Under the alternative emissions permit system, with each owner receiving 10 permits, each allowing the emission of 5, 000 units of GHG by his building, does either owner buy one or more coupons from the other? Assume in your numerical calculations that coupons trade at the value of $3, 006.10. d. If the owners do trade in this "market" for permits, which owner buys the first permit? d. If there is a mutually beneficial trade in the first permit exchanged, at what range of prices could such a trade benefit both owners? e. If there is more than one permit sold in the sequence of sales and purchases, calculate the range of prices for each successive permit traded f. How many permits, if any, are traded? g. Assuming one or more permits are traded, what is the final number of permits held by the respective owners of Buildings A and B? h. \\What is the final volume of emissions by each building under the assumption that one or more permits are traded? i. What is the final cost to each owner of reducing his building's emissions, once trading - if it cccurs - ends?' i. \\\\hat is the total joint cost to the two-owner commercial real estate industry in Stoner of reducing total emissions by 100, 000.00 units? k. If the joint costs to the owners under the direct regulatory policy and the emissions permit policy differ, which system delivers the desired reduction of emissions at the lower cost? Or are they, in fact, equal