The use of pollution rights licenses can improve efficiency and reduce pollution since
A)Pollution rights licenses do not improve efficiency nor reduce pollution
B)The licenses give environmental groups pollution reducing permits
C)The cost to purchase these licenses means that social costs are

Question

Quizplus · Accepted Answer

Pollution rights licenses work on the principle of setting a limit on the amount of pollution that a company can emit. Companies are granted pollution permits that represent a certain level of emissions. These permits are tradable, which means that companies can buy or sell these permits in the marketplace. By assigning a price to these permits, companies are incentivized to reduce their emissions and earn a profit from their unused permits. This creates a market-based mechanism that internalizes the cost of pollution and encourages companies to find the most cost-effective way to reduce their emissions. As a result, the use of pollution rights licenses can improve efficiency and reduce pollution. However, the cost of these licenses can mean that social costs are incurred.

The Use of Pollution Rights Licenses Can Improve Efficiency and Reduce