In a tradeable effluent permit market,
A) effluent allowances may be used, but not effluent credits
B) high-cost abaters will buy permits as long as the price is lower than their MAC
C) a permit price should be established where all polluters' MACs are equal
D) all of the above
E) (b) and (c) only

Question

Quizplus · Accepted Answer

Effluent allowances and credits are the same thing in a tradeable effluent permit market, so option A is incorrect. Option B is correct, as high-cost abaters will only buy permits if the price is lower than their Marginal Abatement Cost (MAC). Option C is also correct, as establishing a permit price where all polluters' MACs are equal ensures that a fair and efficient distribution of pollution reduction efforts takes place. Therefore, the correct answer is (E).

In a Tradeable Effluent Permit Market