3 Cap and Trade Emissions Programs: 40 points Suppose we have two electricity-generating units (EGUs) in the electricity sector. As we have discussed in lecture and covered in readings, producing electricity generates negative externalities through the production of greenhouse gases. - EGU 1 emits 6 million tons of CO2 and it is more costly for this firm to ahate. - EGU 2 emits 6 million tons of CO2 and it is less costly for this firm to abate. Table 1: Marginal Abatement Costs for EGUs Suppose regulators impose an emissions quantity cap of 7 million tons of CO2. As such, they dole out 7 permits which provide the permit holders to emit 1 million tons of CO2 for each permit. This means the quantity of ahatement between the two EGUs must equal 5 million tons of CO2. This fully accounts for the 12 million tons total emitted by the two EGUs. Let's explore how the differing marginal abatement costs of the two factories affect their behavior in response to the quantity cap