Problem - As a test case, City A has decided to pursue regulatory approaches to controlling CO2 in B town, where CO₂ emissions primarily come from local electricity generation. There are three power plants in B town, and each has submitted their estimated abatement costs for CO₂.

Plant 1: Gas Plant releasing 2,400,000 tons of CO₂/year

Plant 2: Gas Plant releasing 90,000 tons of CO₂/year

Plant 3: Coal Plant releasing 2,740,000 tons of CO₂/year

B wants to reduce CO2 emissions by 1,569,000 tons per year (approximately a 30% reduction). They are looking at alternative approaches to achieving this goal, and are interested in comparing the costs of command-and-control to the least-cost solution to achieving this abatement level.

a) Command-and-control: Each plant must reduce their annual CO₂ emissions by 30%. Please complete the following table.

b) Least-Cost solution: What is the least cost at which the 30% abatement level could be achieved? Complete the following table to indicate how much each plant would abate and the costs of this abatement using least-cost methods.

c) What policies might you recommend to arrive at the least-cost solution? What are some of the pros and cons of each?