Question 1

Transferable emission permit schemes provide _______ incentive to invest in R&D to find cheaper methods of reducing emissions as emission taxes that achieve the same level of abatement.

Accepted Answer

Transferable emission permit schemes provide the same incentive to invest in R&D to find cheaper methods of reducing emissions as emission taxes that achieve the same level of abatement, because both mechanisms make reducing emissions financially beneficial for firms.

Question 2

The EPA's CAP market allowed firms to use whatever means they found the cheapest to reduce SO₂ emissions

Accepted Answer

The statement clearly states that the EPA's CAP market allowed firms to use whatever means they found the cheapest to reduce SO₂ emissions, but did not dictate the technology to be used. Therefore, the best choice is B. The other options (A, C, and D) are incorrect and contradict the statement.

Question 3

Refer to the figure above.Assume that the firm is facing MAC₁ and that it has adjusted its permit holdings to e₁.What is the firm's incentive to engage in R&D to reduce abatement costs to MAC₂?

Accepted Answer

B

Question 4

A polluter will ______ a permit if the price is ________ its MAC of controlling emissions.

Accepted Answer

If the price is less than the MAC of controlling emissions, it would be cheaper for the polluter to buy a permit than to incur the cost of controlling their emissions. Therefore, the polluter would buy a permit if the price is less than their MAC.

Question 5

The first problem encountered when trying to institute a cap-and-trade program is

Accepted Answer

The distribution of permits is the first problem encountered because it determines who has the right to emit pollutants, and there may be disputes over who deserves the permits. This can lead to political resistance and delays in implementing the program. Once the permits are distributed, the market for permits can be established, and the price for permits can be set based on supply and demand. The regulatory agency can then oversee the program and enforce compliance.

Question 6

The EPA program that established an allowable base rates for the amount of lead in the gasoline that oil refineries produced and allowed for the trading of excess allowances is an example of

Accepted Answer

Emission rate trading involves setting a cap on emissions and allowing entities to trade allowances, similar to the EPA program for lead in gasoline.

Question 7

The EPA's CAP program for SO₂ gave producers an incentive to look for cheaper ways of lowering emissions because

Accepted Answer

The answer of The EPA's CAP program for SO₂ gave...

Question 8

The most direct way to accomplish a reduction in the number of permits for a cap-and-trade is

Accepted Answer

The answer of The most direct way to accomplish a...

Question 9

Cap-and-trade programs require an established set of rules for trading.It is recommended that the regulating agency set the rules and not interfere with the market, because market interference

Accepted Answer

Market interference, such as changing the rules or regulations in the middle of trading, creates uncertainty and increases transaction costs for companies participating in the cap-and-trade program. This interference can also disrupt the efficient flow of permits, which can decrease the effectiveness of the program. Therefore, it is recommended that the regulating agency establishes clear and consistent rules for trading and then allows the market to operate freely within those rules.

Question 10

In a cap and trade program, permits flow from polluters with relatively ________ abatement cost curves to polluters with relatively ___________ abatement cost curves.

Accepted Answer

In a cap-and-trade program, permits are initially allocated to polluters based on their historical emissions, which means that polluters with relatively low emissions will receive more permits than polluters with high emissions. Then, as the program progresses, polluters with relatively low abatement costs will use their excess permits to sell to polluters with relatively high abatement costs, thus allowing for a more efficient distribution of emissions reductions. Therefore, the permits flow from polluters with relatively low abatement cost curves (i.e. low costs for reducing emissions) to polluters with relatively high abatement cost curves (i.e. high costs for reducing emissions), making choice A the correct answer.

Question 11

The ________ established an innovative permit-trading scheme for the control of airborne SO₂ emissions in ________.

Accepted Answer

The 1990 Clean Air Act Amendments established an innovative permit-trading scheme known as the Acid Rain Program for the control of airborne emissions of sulfur dioxide (SO2) and nitrogen oxides (NOx) in the United States. This program has been successful in reducing emissions and improving air quality.

Question 12

Refer to the figure above.Assume that the firm is facing MAC₁ and that it has adjusted its permit holdings to e₁.What is the firm's permit purchase costs?

Accepted Answer

The answer of Refer to the figure above.Assume that the...

Question 13

Transferable emission permit programs work best if there is little competition among buyers and sellers of permits.

Accepted Answer

A competitive permit market ensures efficient allocation of permits, leading to cost-effective pollution reduction.

Question 14

A polluter will ________ its emissions and sell its excess permits on the market if the market price of permits is ________ its MAC at its chosen emission level.

Accepted Answer

A polluter will reduce its emissions and sell its excess permits on the market if the market price of permits is greater than its Marginal Abatement Cost (MAC) at its chosen emission level, as this makes reducing emissions and selling permits more profitable than emitting more.

Question 15

The EPA's CAP program for _________ was the first large-scale example of a system of transferable emission permits tried in the United States.

Accepted Answer

The answer of The EPA's CAP program for _________ was...

Question 16

Refer to the figure above.Assume that the firm is facing MAC₁ and that it has adjusted its permit holdings to e₁.What are the firm's abatement costs?

Accepted Answer

The firm's abatement costs are represented by the area under the marginal abatement cost curve (MAC) up to the level of abatement e1, which is area (a+b).

Question 17

Cap-and-trade is a trading system designed to achieve more efficient pollution control.It can be described as:

Accepted Answer

Cap-and-trade is a system where a government sets a cap on the total level of emissions and issues permits that can be traded among firms, allowing them to emit a certain amount of pollution. This creates a financial incentive for companies to reduce emissions.

Question 18

In cap-and-trade programs where the damages are non-uniform, there is a direct trade-off between the hydrological and meteorological reasons for restricting trade and

Accepted Answer

Non-uniform damages mean that certain industries or regions will be more affected than others by the cap on emissions. This can create economic inefficiencies, as some businesses may be unfairly burdened while others have an easier time meeting the cap. However, if restrictions on trade are lifted to alleviate these disparities, it could undermine the overall goal of reducing emissions. Therefore, there is a trade-off between economic efficiencies from competition and the need to restrict trade to effectively address climate change. The other options, such as political resistance to taxation or the authority of the EPA, may be relevant factors but are not directly related to the trade-off between meteorological and hydrological reasons for restricting trade. Incentives for R&D may play a role in addressing climate change but are not directly relevant to the trade-off described in the question.

Question 19

Emission rate trading is a trading system designed to achieve more efficient pollution control.It can be described as:

Accepted Answer

Emission rate trading focuses on regulating the rate at which pollutants are emitted, allowing firms to trade emission rates to achieve compliance efficiently.

Question 20

One of the ways that initial pollution rights can be allocated in a cap and trade program is by equal distribution among all existing sources of a particular effluent.Which of the following is a reason that equal distribution of initial pollution rights among polluters is flawed?

Accepted Answer

Equal distribution of pollution rights does not account for differences in firm size, industry output value, or prior investments in emissions reductions, making it potentially unfair and inefficient.

Quiz 13: Incentive-Based Strategies: Market Trading Systems

Transferable emission permit schemes provide _______ incentive to invest in R&D to find cheaper methods of reducing emissions as emission taxes that achieve the same level of abatement.

The EPA's CAP market allowed firms to use whatever means they found the cheapest to reduce SO₂ emissions

Refer to the figure above.Assume that the firm is facing MAC₁ and that it has adjusted its permit holdings to e₁.What is the firm's incentive to engage in R&D to reduce abatement costs to MAC₂?

A polluter will a permit if the price is __ its MAC of controlling emissions.

The first problem encountered when trying to institute a cap-and-trade program is

The EPA program that established an allowable base rates for the amount of lead in the gasoline that oil refineries produced and allowed for the trading of excess allowances is an example of

The EPA's CAP program for SO₂ gave producers an incentive to look for cheaper ways of lowering emissions because

The most direct way to accomplish a reduction in the number of permits for a cap-and-trade is

Cap-and-trade programs require an established set of rules for trading.It is recommended that the regulating agency set the rules and not interfere with the market, because market interference

In a cap and trade program, permits flow from polluters with relatively abatement cost curves to polluters with relatively ___ abatement cost curves.

The established an innovative permit-trading scheme for the control of airborne SO₂ emissions in .

Refer to the figure above.Assume that the firm is facing MAC₁ and that it has adjusted its permit holdings to e₁.What is the firm's permit purchase costs?

Transferable emission permit programs work best if there is little competition among buyers and sellers of permits.

A polluter will its emissions and sell its excess permits on the market if the market price of permits is its MAC at its chosen emission level.

The EPA's CAP program for _________ was the first large-scale example of a system of transferable emission permits tried in the United States.

Refer to the figure above.Assume that the firm is facing MAC₁ and that it has adjusted its permit holdings to e₁.What are the firm's abatement costs?

Cap-and-trade is a trading system designed to achieve more efficient pollution control.It can be described as:

In cap-and-trade programs where the damages are non-uniform, there is a direct trade-off between the hydrological and meteorological reasons for restricting trade and

Emission rate trading is a trading system designed to achieve more efficient pollution control.It can be described as:

One of the ways that initial pollution rights can be allocated in a cap and trade program is by equal distribution among all existing sources of a particular effluent.Which of the following is a reason that equal distribution of initial pollution rights among polluters is flawed?

Quiz 13: Incentive-Based Strategies: Market Trading Systems

Transferable emission permit schemes provide _______ incentive to invest in R&D to find cheaper methods of reducing emissions as emission taxes that achieve the same level of abatement.

The EPA's CAP market allowed firms to use whatever means they found the cheapest to reduce SO2 emissions

Refer to the figure above.Assume that the firm is facing MAC1 and that it has adjusted its permit holdings to e1.What is the firm's incentive to engage in R&D to reduce abatement costs to MAC2?

A polluter will ______ a permit if the price is ________ its MAC of controlling emissions.

The first problem encountered when trying to institute a cap-and-trade program is

The EPA program that established an allowable base rates for the amount of lead in the gasoline that oil refineries produced and allowed for the trading of excess allowances is an example of

The EPA's CAP program for SO2 gave producers an incentive to look for cheaper ways of lowering emissions because

The most direct way to accomplish a reduction in the number of permits for a cap-and-trade is

Cap-and-trade programs require an established set of rules for trading.It is recommended that the regulating agency set the rules and not interfere with the market, because market interference

In a cap and trade program, permits flow from polluters with relatively ________ abatement cost curves to polluters with relatively ___________ abatement cost curves.

The ________ established an innovative permit-trading scheme for the control of airborne SO2 emissions in ________.

Refer to the figure above.Assume that the firm is facing MAC1 and that it has adjusted its permit holdings to e1.What is the firm's permit purchase costs?

Transferable emission permit programs work best if there is little competition among buyers and sellers of permits.

A polluter will ________ its emissions and sell its excess permits on the market if the market price of permits is ________ its MAC at its chosen emission level.

The EPA's CAP program for _________ was the first large-scale example of a system of transferable emission permits tried in the United States.

Refer to the figure above.Assume that the firm is facing MAC1 and that it has adjusted its permit holdings to e1.What are the firm's abatement costs?

Cap-and-trade is a trading system designed to achieve more efficient pollution control.It can be described as:

In cap-and-trade programs where the damages are non-uniform, there is a direct trade-off between the hydrological and meteorological reasons for restricting trade and

Emission rate trading is a trading system designed to achieve more efficient pollution control.It can be described as:

One of the ways that initial pollution rights can be allocated in a cap and trade program is by equal distribution among all existing sources of a particular effluent.Which of the following is a reason that equal distribution of initial pollution rights among polluters is flawed?

The EPA's CAP market allowed firms to use whatever means they found the cheapest to reduce SO₂ emissions

Refer to the figure above.Assume that the firm is facing MAC₁ and that it has adjusted its permit holdings to e₁.What is the firm's incentive to engage in R&D to reduce abatement costs to MAC₂?

A polluter will a permit if the price is __ its MAC of controlling emissions.

The EPA's CAP program for SO₂ gave producers an incentive to look for cheaper ways of lowering emissions because

In a cap and trade program, permits flow from polluters with relatively abatement cost curves to polluters with relatively ___ abatement cost curves.

The established an innovative permit-trading scheme for the control of airborne SO₂ emissions in .

Refer to the figure above.Assume that the firm is facing MAC₁ and that it has adjusted its permit holdings to e₁.What is the firm's permit purchase costs?

A polluter will its emissions and sell its excess permits on the market if the market price of permits is its MAC at its chosen emission level.

Refer to the figure above.Assume that the firm is facing MAC₁ and that it has adjusted its permit holdings to e₁.What are the firm's abatement costs?