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Country 1 400 Country 2 PS MAC 200 200 120 100 40 50 100 Z 25 35 50 Z Consider the following two countries: country A having TACA = 90 ZA-(ZA)2; and country B having TACB = 200 ZB-2(ZB)2. Initial carbon emissions are ZA = 45; and ZB = 50. Z = 95. The carbon authority decides to reduce emissions by 45 units and it is decided that ZA = 25; and ZB = 25. The total cap Z = 50. What are the gains from carbon trading to country A and country B? (calculate this using a graph as Figure). Answer: For country A: The change in its total abatement costs if it reduces emissions from 25 to 15 tonnes is shown in Figure 1 by areas (a+b). Area a = \ [25 - 15] x [$60 - 40] = $100. Area b = [(25 - 15) x $ 40] = $ 400. Hence area (a+b) = $ 500. This How? How towi represents extra abatement costs. But country A sells 10 permits to Coun.. YB for $60 per permit. It receives area (a+b+c) = 10 ? 1. permits x $60 = $600. Country A's gain from carbon trading equals area c= $ 100. Country B's net gain from trade is [areas (due) - area (e)] = area d=Y ($100 - $60) x 10 = $ 200. The combined gains from carbon trading equals areas (c+d) = $ 300. 7 ? 1 Country 1 400 Country 2 PS MAC 200 200 120 100 40 50 100 Z 25 35 50 Z Consider the following two countries: country A having TACA = 90 ZA-(ZA)2; and country B having TACB = 200 ZB-2(ZB)2. Initial carbon emissions are ZA = 45; and ZB = 50. Z = 95. The carbon authority decides to reduce emissions by 45 units and it is decided that ZA = 25; and ZB = 25. The total cap Z = 50. What are the gains from carbon trading to country A and country B? (calculate this using a graph as Figure). Answer: For country A: The change in its total abatement costs if it reduces emissions from 25 to 15 tonnes is shown in Figure 1 by areas (a+b). Area a = \ [25 - 15] x [$60 - 40] = $100. Area b = [(25 - 15) x $ 40] = $ 400. Hence area (a+b) = $ 500. This How? How towi represents extra abatement costs. But country A sells 10 permits to Coun.. YB for $60 per permit. It receives area (a+b+c) = 10 ? 1. permits x $60 = $600. Country A's gain from carbon trading equals area c= $ 100. Country B's net gain from trade is [areas (due) - area (e)] = area d=Y ($100 - $60) x 10 = $ 200. The combined gains from carbon trading equals areas (c+d) = $ 300. 7 ? 1