Y5

3. Mitigation Strategies. Consider two manufacturing plants run by ACME Corporation and Buy 'n' Large Corporation, here denoted by A and B. Both plants emit 10 tons of CO2 per year. The marginal cost for reducing emissions are given in the table below. # of tons reduced Marginal cost for A ($) Marginal cost for B ($) 5 2 10 4 15 6 20 8 DOO O UT A W N P 25 10 30 12 40 14 50 18 70 24 10 100 32 a. Carbon Tax: If a carbon tax of $20 per ton of CO2 is imposed... i. By how many tons will manufacturer A reduce its emissions? ii. In total, how much money will manufacturer B spend to reduce its emissions? iii. In total, how much money will manufacturer B spend on the carbon tax (i.e., to cover the total CO2 that it still emits)? iv. Considering both plants, how many tons of CO2 were not emitted because of the carbon tax? V. Does this carbon tax cover the social cost of carbon? Why or why not