Question

In: Economics

If the supply of emissions permits decreases a.the price of permits will fall b.firms will increase...

If the supply of emissions permits decreases

a.the price of permits will fall

b.firms will increase emissions

c.the price of permits will rise

d.more firms will want to buy permits

Emission permits are initially allocated

a.by auction

b.equally across all firms

c.based on current emissions

d.there is no standard way that permits are allocated

The total allowable emissions under a tradable pollution permit system can be reduced

a.by allowing offsets

b.by allowing entities to buy a permit and retire it

c.by allocating more permits as firms grow

d.it can never by reduced

Transfer coefficients

a.define how emissions translate to damages when there are nonuniform emissions

b.define how emissions translate to costs of abatement when emissions are nonuniform

c.are used to adjust for trades across zones with differential marginal emissions damages

d.both the first and third answers

For tradeable pollution permit markets to work well,

a.there must be enough buyers and sellers to support competition

b.there must be effective monitoring

c.both of the above

d.neither of the above

Monitoring of polluters under an emissions trading system is more difficult and costly than with emissions charges.

a.True

b.False

Which of the following is true?

a.Cap-and-trade is a quantity based system.

b.Cap-and-trade is a price based system.

c.A program of emissions charges is a price based system.

d.Both the first and third answers are true.

Solutions

Expert Solution

Ques 1 ) c.the price of permits will rise

Given the demand remaining constant, reduction in supply will increase the prices.

Ques 2) c.based on current emissions

The permits are based on the level of emissions of the company.

Ques 3 ) b.by allowing entities to buy a permit and retire it

Instead of offsetting, purchasing and retiring it is a feasible option.

Ques 4 ) d.both the first and third answers

Transfer coefficients help in both predicting pollutant emission rate and thus allow emissions translate to damages when there are nonuniform emissions. And also are used to adjust for trades across zones with differential marginal emissions damages.

Ques 5 ) c.both of the above

The market to work all 3 are important, buyers, sellers and effective monitoring.

Ques 6 ) a.True

Monitoring all the parties is more time consuming and costly overall.

Ques 7 ) d.Both the first and third answers are true.

Cap-and-trade is a quantity based system. The authorities set the quantity emitted

And program of emissions charges is a price based system. The authorities set the emission charges.

Rahul Sunny answered 1 year ago

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