Question 1:

State A launched a voluntary carbon trading programme and two major firms have participated. Suppose the objective of State A is to achieve a 16% reduction in carbon monoxide (CO) in an urban area and each firm have the following costs:

Firma 1 / Firm 1: TAC1=1000+2.5(A1)2 Firma 2 / Firm 2: TAC2=500+1.5(A2)2 MAC1=5A1 MAC2=3A2

*TAC= Kos Pengurangan Keseluruhan / Total Abatement Cost; MAC = Kos Pengurangan Marginal/ Marginal Abatement Cost

A1 and A2 represent the percentage of CO emission abatement achieved by Firm 1 and Firm 2, respectively, and TAC and MAC are measured in thousands of dollars.

a) Calculate the TAC and MAC for each firm if a uniform abatement standard were used.

[4 mark)

B) Based on your answer in (a), are there any economic incentives for Firm 1 and Firm 2 to participate in the trading program? Justify it.

[2 Markah/ 2 marks]

C) Calculate the cost savings associated with the cost-effective abatement allocation that could be achieved through this trading for both firms.

D) Calculate the price of each tradable permit for each firm to achieve cost-effective solution.

Question 2: Economic valuation refers to the effort to establish quantitative values of ecosystem goods and services in environmental resources. Justify THREE (3) importance of economic valuation to the environment.

[12 markah / 12 marks]

b) Compare FOUR (4) differences between the Contingent Valuation Method (CVM) and the Travel Cost Method (TCM) and discuss the relative advantages and disadvantages of these two methods.

[8 markah / 8 marks]

Section B-

Question 1: Soalan 1/ Question 1

a) Summarise the meaning of the pollution haven hypothesis. Justify why it might be challenging to prove the existence of this theory.

[10 markah / 10 marks]

b) Empirical evidence does not consistently support the environmental Kuznets curve. Discuss what the curve highlights about the trade-off between economic growth and environmental degradation?