Which of the following are true of tradeable pollution permits? (i) they will be sold by firms that can reduce pollution at low costs
(ii) they will be bought by firms that can reduce pollution only at high costs
(iii) they are likely to create a higher level of total pollution
A) (i), (ii) and (iii)
B) (iii) only
C) (ii) and (iii) only
D) (i) and (ii) only

Question

Quizplus · Accepted Answer

Tradable permits are allocated based on polluters' abilities to reduce pollution at low costs, which means firms that can reduce pollution at low costs will be more likely to sell the permits. Firms that can only reduce pollution at high costs are more likely to buy the permits. This leads to an efficient allocation of pollution reduction efforts. However, if the number of permits is set too high, it could lead to a higher level of total pollution. Therefore, (i) and (ii) are true, but (iii) is not necessarily true.

Which of the Following Are True of Tradeable Pollution Permits