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Government regulations often grandfather the pollution control equipment being used by existing power plants while requiring a higher level of pollution control from new ones.

Government regulations often "grandfather" the pollution control equipment being used by existing power plants while requiring a higher level of pollution control from new ones. Discuss the implications of such a policy relative to the use of a pollution tax. In your answer note impacts on (a) the lifetime of power plants, (b) entry by new firms, (c) innovation in developing pollution control technology, (d) pollution emissions, and (e) the price paid for electricity by consumers.

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