Why is this policy not cost effective

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Reference no: EM131097271

Per the Kyoto Protocol, European countries have targeted a reduction of CO2 emissions. There are two main types of coal-fire plants in the EU: one type is designed to be able to be retrofitted with abatement equipment at a lower cost than the other type. The EU government has given its economists the job of figuring out the least costly way to reach the goal of reducing pollution by 120 tons of CO2 this year. The marginal abatement costs for each type of plant are as follows: Type 1: MC1 = 5q1 Type 2: MC2 = 3q2 where q1 is the total tons of CO2 removed by type 1 plants where q2 is the total tons of CO2 removed by type 2 plants 1. Suppose the EU implements a command and control system to reduce CO2 emissions. Each plant is to abate 60 units.

Why is this policy not cost effective?

Show this is the case using 2 methods: a graph and two types of calculations: one finding the TVC and one using the MCs.

Reference no: EM131097271

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