A large electric utility company releases 62 million tons of greenhouse gases (mostly carbon dioxide) into the environment each year. This company has committed to spending $1.2 billion in capital over the next five years to reduce its annual emissions by 5%. 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 3 billion tons of greenhouse gases per year, how much capital must be spent to reduce total emissions by 3% over the next five years based on your answer in Part (a)?