A market for pollution permits can efficiently allocate the right to pollute.

Question

Quizplus · Accepted Answer

In a market for pollution permits, companies are given a certain amount of permits that allow them to emit a specified amount of pollutants. If a company emits less than their allotted amount, they can sell their unused permits to other companies that need them. This creates a financial incentive for companies to reduce their pollution levels, as reducing emissions not only avoids costly fines but also allows them to benefit financially from selling unused permits. This system can efficiently allocate the right to pollute among industries and incentivize companies to reduce their pollution levels.

A Market for Pollution Permits Can Efficiently Allocate the Right