N6

Baseline - assume the firm is currently not paying for emissions and is emitting 40 tons per year. Give Property Rights to the Firm The firm has rights to supply emission-reductions (r tons/yr): Let the firm's cost of e-reductions be: Total costs of e-reductions =2 Marginal abatement cost of e-reductions = 2r The runner benefits from e-reductions, creating demand: Total benefits of e-reduction - BOr - r? Marginal benefits of e-reduction - 80 - 2r Assume the firm and runner agreed to the same efficient price for all reductions: If the property rights were given to the runner, how would the expected outcomes compare? ) Nothing would be the same Same efficient price, reductions different runner and firm net benefits and total net benefits @) Stime efficient price, reductions, runner net benefits, firm net benchts, and total net benefits Same efficient price, reductions, and total net benefits; different runner and firm not benefits