🏭 Uniform vs. Optimal Emissions Permits

MAC curves plotted against emissions — see how downward-sloping MACs horizontally sum to an aggregate emissions demand curve

1
Set Firm MAC Curves
2
Choose Emissions Cap
3
Compare Uniform vs. Optimal
🎯 Emissions Cap
Total Emissions Allowed 40 units

Combined baseline emissions: 100 units
Required abatement: 60 units

🏭 Firm 1 (Low-Cost Abater)
MAC Slope (c₁) 0.5
MAC₁(E₁) = c₁ × (Ē₁ − E₁) = 0.5 × (50 − E₁)

Baseline emissions Ē₁ = 50 units

🏭 Firm 2 (High-Cost Abater)
MAC Slope (c₂) 2.0
MAC₂(E₂) = c₂ × (Ē₂ − E₂) = 2.0 × (50 − E₂)

Baseline emissions Ē₂ = 50 units

💰 Cost Savings
Uniform Permits Cost $1,125
Optimal Permits Cost $900
💵 Savings from Trading $225 (20%)
💡 Key Insight

With emissions on the x-axis, MACs slope downward: as a firm emits more (abates less), its marginal cost of further abatement falls.

The aggregate MAC is the horizontal sum — at each price, total emissions equals the sum of each firm's emissions. Trading permits until MAC₁ = MAC₂ minimizes total cost.

Firm 1: Low-Cost Abater
Baseline emissions: 50 units
Uniform E₁: 20
Optimal E₁: 2
Firm 2: High-Cost Abater
Baseline emissions: 50 units
Uniform E₂: 20
Optimal E₂: 38
Combined: Aggregate MAC (Emissions Axis)
Horizontal sum of firm MACs — total emissions at each permit price
MAC₁ (Firm 1)
MAC₂ (Firm 2)
Aggregate MAC
Uniform Permits
$1,125
Tradeable Permits
$900