Suppose two countries with domestic cap-and-trade policies are considering linking their two systems.

Country A

• Emits 60 tons of pollution and has a domestic marginal cost of abatement of $10.
• The emissions cap is set to 20 tons of emissions.

Country B

• Emits 80 tons of pollution and has a domestic marginal cost of abatement of $1*Q where Q = tons of emissions abatement
• The emissions cap is set to 40 tons.

Before linking, what would be the equilibrium permit price for each separate market? How much abatement would each country do?