Question

A large electric utility company spews million tons of greenhouse gases​ (mostly carbon​ dioxide) into the environment each year. This company has committed to spending ​$ billion in capital over the next five years to reduce its annual emissions by ​%. More will be spent after five years to reduce greenhouse gases further. a. What is the implicit cost of a ton of greenhouse​ gas

Answer 1

This question is incomplete, the complete question is;

A large electric utility company spews 62 million tons of greenhouse gases​ (mostly carbon​ dioxide) into the environment each year. This company has committed to spending ​$2.7 billion in capital over the next five years to reduce its annual emissions by ​4%. More will be spent after five years to reduce greenhouse gases further.

a. What is the implicit cost of a ton of greenhouse​ gas

b. if the United states produces 4 billion tons of greenhouse gases each year, how much capital must be spent to reduce total emission by 2% over the next five years based on your answer in part a).

Answer:

a) The implicit cost of greenhouse gas is $ 1,088.7097 per ton

b) $87.096 billion of capital must be spent to reduce total emissions by 2% over the next five years.

Explanation:

Given that;

Annual Emission = 62 million tons

Capital Spending = $2.7 billion

Annual Emission reduction = 5%

partA

Reduction in Emission = 62 million tons per year × 4/100 = 2.48 million tons of greenhouse gas per year

Implicit cost of reducing 1 ton of carbon dioxide = Cost invested / Annual gas release after reduction.

= $2.7 billion / $2.48 million = 2.7 × 10⁹ / 2.48 × 10⁶  = 1088.709 7

∴ The implicit cost of greenhouse gas is $ 1088.7097 per ton

part B

Reduction in Emission = 4 billion tons per year × 2/100 = 80,000,000 tons

Total Cost = 1088.709 × 80,000,000 = $87.096 billion

∴ $87.096 billion of capital must be spent to reduce total emissions by 2% over the next five years.

Answer 2

a) The implicit cost of greenhouse gas is $ 1,088.7097 per ton

b) $87.096 billion of capital must be spent to reduce total emissions by 2% over the next five years.

Given that;

• Annual Emission = 62 million tons
• Capital Spending = $2.7 billion
• Annual Emission reduction = 5%

(a)

Reduction in Emission = 62 million tons per year × 4%

= 2.48 million tons of greenhouse gas per year

Now  

Implicit cost of reducing 1 ton of carbon dioxide = Cost invested ÷ Annual gas release after reduction.

= $2.7 billion ÷ $2.48 million

= 2.7 × 10⁹ ÷ 2.48 × 10⁶  

= 1088.709 7

(b)

Reduction in Emission = 4 billion tons per year × 2%

= 80,000,000 tons

Total Cost = 1088.709 × 80,000,000

= $87.096 billion

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