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Price/ton of CO2 Emission ; MSC P MSB Q. Quantity of CO2 Emitted
This diagram above is related to the situation of increasing CO2 emission in the atmosphere causing the ozone layer depletion. This depletion of ozone layer reduces its capability of absorbing the Sun's ultraviolet radiation. The environmental danger of depletion of ozone layer is a great threat to the stability of earth's atmosphere above the surface of the earth. The increasing global warming is the effect of this depletion of ozone layer. Suppose the downward sloping curve is the marginal social benefit (MSB) of reducing CO2 emission, and the upward sloping curve is the marginal social cost of reducing CO2 emission. Q42. What the optimum level of CO2 reduction that satisfy the economic efficiency condition from social marginal cost perspective? The equilibrium point between MSC and MSB to intersect O All of these answers are correct statements. It is PI and Q1 combination because MSC - MSB at this equilibrium to satisfy complete internalization of extemality. O P1 and Q1 respectively Question 43 1 pts In order to achieve the optimum level of carbon reduction you have answered in Q 48 above, the regulators have two different options: Either by imposing Carbon tax rate per ton of CO2 emission or alternatively, use of marketable permits systems. A carbon tax rate is called effluent tax to relate to the marginal cost of CO2 reduction as equivalent to MSC. However, the. Despite its advantages in the SR, the cost of enforcing this tax rate and the pressure from political lobbying by vested interest group, its theoretical appeal was not fully realized. Economists have also gave more advantages from the second option of marketable permits system. One of the key advantages for Marketable permits is Implementation of fixed quota of pollution level with free market system of buying and selling fixed # of pollution permits issued among polluters. This process gives flexibility to equalize the MSC and MSB with fixed quota of emission. O increasing political lobbying to support for this option Creating a "hotspot" of pollution certain industrial concentrated areas. The marginal cost of emission reduction is lowered under this option
Question 44 1 pts Given the answers to Q42 and 43 based on above diagram, suppose the use of renewable energy such as solar power, wind power and hydrogen fuel power use of energy has significantly increased in the energy market as substitutes for fossil fuel used source of energy. Given this transformation, how would you change the conclusion (s) you have drawn in your answer to Q43? All of these possible answers are correct statements. O MSC of externality will decline and so will the decline in optimu price of internalization The demand for pollution permits will decline O MC of pollution reduction in the form of CO2 emission will decline B.