Cap-and-trade programs require an established set of rules for trading. It is recommended that the regulating agency set the rules and not interfere with the market, because market interference
A) increases transactions costs.
B) causes uncertainty.
C) interferes with the efficient flow of permits.
D) all of the above.

Question

Quizplus · Accepted Answer

Market interference, such as changing the rules or creating uncertainty, can increase transaction costs and disrupt the efficient flow of permits. This can ultimately harm the effectiveness of the cap-and-trade program. Therefore, it is recommended that the regulating agency sets the rules and allows the market to function without interference.

Cap-And-Trade Programs Require an Established Set of Rules for Trading