Tradeable allowances:
A) are typically hard to pass through the Environmental Protection Agency (EPA) since they allow firms to legally pollute.
B) are an efficient way to reduce pollution at lower costs.
C) decrease the profitability of firms since now they have to pay for the rights to pollute.
D) are equal to the social surplus in the market.

Question

Quizplus · Accepted Answer

Tradeable allowances allow firms to buy or sell permits to emit a certain amount of pollution, creating a market for pollution. This can lead to an efficient allocation of pollution reduction efforts, as firms that can reduce pollution at a lower cost can sell their allowances to firms that would have to pay more to reduce pollution. This leads to a reduction in overall pollution at a lower cost than traditional command and control regulations.

Tradeable Allowances