Suppose the marginal costs of mitigating Greenhouse Gas emissions for two coal producers are given as follows:

Producer 1: MC1 = 10Q1

Producer 2: MC2 = 40Q2

where MC1 and MC2 are the marginal control costs and Q1 and Q2 are the volumes of emissions reduced by producers 1 and 2 respectively. With no controls at all, each firm emits 50 units totalling 100 units.

• Compute the cost-effective allocation of control responsibility if a total reduction of 50 emission units is required.
• If the Government wants to charge an emission tax, what per unit tax should they impose?
• How much total revenue would the Government collect from the emission tax of section b)?