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In the two firm environment described above,  after trading, firm 2 will 

If investors are risk‐neutral, what is the effective yield on the corporate bond they would expect, assuming they were only concerned about the risk of heatwaves?

In the two firm environment described above, after trading, firm 1 will 

At

Imposing

The difference in the planner’s FOC and the consumer’s FOC can be explained by:

Which algebraic expression is the consumer’s FOC, assuming no income taxes?

The equimarginal principle states that in order to get the greatest reductions in _______ emissions for a given _________ abatement cost, all firms should emit at a point that offers the same marginal abatement cost for each firm.

Now consider transition risk: a carbon‐tax has a 25% chance of raising costs by 5%.  What is the expected transition premium for a risk‐neutral investor?

When marginal damages for a pollutant vary by region, time of day, or season, a(n) ________ will not be socially efficient but ________ that set the MAC curve equal to each MD curve are socially efficient.