Tradable pollution permits
A)have prices that are set by the government.
B)will be more valuable to firms that can reduce pollution only at high costs.
C)are likely to create a higher level of total pollution.
D)are less desirable than command-and-control policies to reduce pollution.

Question

Quizplus · Accepted Answer

Tradable pollution permits create a market for pollution reduction and pricing is determined by supply and demand. Firms with high pollution reduction costs will find it more valuable to purchase permits from those who can reduce pollution more easily and cheaply. This incentivizes firms to find innovative ways to reduce pollution and creates a more efficient allocation of pollution reduction efforts. It is not likely to create a higher level of total pollution as the overall number of permits issued is limited to the desired level of pollution reduction. Tradable pollution permits are often preferred over command-and-control policies as they provide flexibility and potential cost savings.

Tradable Pollution Permits