In the Exxon Valdez legal case, several contingent valuation studies were part of estimates of liability damages owned by the oil company, Exxon.
ENVIRON 805K Problem Set 6
1. In the Exxon Valdez legal case, several contingent valuation studies were part of estimates of liability damages owned by the oil company, Exxon. Damages were argued to include the value for all U.S. residents of an unpolluted Prince Willian Sound (where the spill occurred), bringing the issue of nonuse value to the front of the debate. Describe why a resident of the United States far from Alaska might associate real value (be willing to devote real resources) to a place he or she will never see or experience, such as coastal Alaska or the Amazon basin.
For more information, please check https://www.history.com/topics/1980s/exxon-valdez-oil-spill
2. Two firms can control emissions at the following marginal costs: MC1 = $200q1, MC2 $100q2, where q1 and q2 are, respectively, the amount of emissions reduced by the first and second firms. Assume that with no control at all, each firm would be emitting 20 units of emissions or a total of 40 units for both firms.
(a) Compute the cost-effective allocation of control responsibility if a total reduction of 21
units of emissions is necessary.
(b) Assume that the control authority wanted to reach its objective in (a) by using an emissions charge system. What per-unit charge should be imposed? How much revenue would the control authority collect?
Answer preview in the Exxon Valdez legal case, several contingent valuation studies were part of estimates of liability damages owned by the oil company, Exxon.
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