Reference no: EM133368298

Questions:

1. The 1977 Clean Air Act Amendments required new electric power plants to install scrubbers in order to remove sulfur dioxide emissions. Such an approach is often called a "technology-forcing" approach, and is typically promoted as a way of ensuring that polluters install the most advanced or best available abatement technology. From an economic perspective, what kind of incentive does such a policy provide for the development and adoption of new technologies?

2. Much of the political debate surrounding the use of emissions trading concerns the allocation of the pollution allowances-in particular, whether to auction off the allowances, or give them away for free. Explain why the method of allocation does not affect how much pollution firms end up controlling, assuming that transactions costs are low. What do you think would happen if transactions costs were high?

3. Navigate and read about the costs and benefits of installing PV, from a household's perspective and from Hawaiian 1 Econ 358 5-week Homework 4 University of Hawaii at Manoa Electric's. Play around with the interactive calculator. Dick Rosenblum, the CEO of Hawaiian Electric, often complains about net metering agreements because homeowners get retail prices instead of wholesale prices for the energy their panels generate. (Also see this article by energy economist Severin Borenstein.) As the UHERO blog post points out, a side effect from current net metering agreements is that households over-install solar. As a result, they often pay a zero marginal price for electricity, which discourages conservation. Devise a different model for net metering agreements that can address both Dick Rosenblum's complaints and restore incentives for households with solar to conserve energy.