Emissions Trading - Economics of International Emissions Trading | Economics International Emissions Trading

Economics of International Emissions Trading

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It is possible for a country to reduce emissions using a Command-Control approach, such as regulation, direct and indirect taxes. The cost of that approach differs between countries because the Marginal Abatement Cost Curve (MAC) — the cost of eliminating an additional unit of pollution — differs by country. It might cost China $2 to eliminate a ton of CO₂, but it would probably cost Norway or the U.S. much more. International emissions-trading markets were created precisely to exploit differing MACs.

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