How much money does your firm save by using the offsets

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Reforestation versus Abatement. Suppose your firm commits to reducing greenhouse gases by 11 tons per year. You can pay for a reforestation project that offsets your emissions at a cost of $7 per ton of carbon offset. Or you can modify your production cost to abate pollution. Your marginal cost of abating the first ton is $3; the marginal cost increases by $1 for each additional ton, to $4 for the second ton, $5 for the third ton, and so on.

a. What s the best combination of reforestation offsets and abatement?

b. How much money does your firm save by using the offsets?

Reference no: EM131134564

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