A market-based approach for reducing pollution to a specific overall authorized level can be achieved by using
A) laws that ban polluting activities.
B) tax credits for pollution control equipment.
C) open market operations.
D) transferable emissions permits.
E) direct regulation.

Question

Quizplus · Accepted Answer

Transferable emissions permits (also known as cap-and-trade systems) allow for a pollution limit to be set and for companies to either reduce their emissions to meet that limit or purchase permits from other companies who have reduced their emissions below the limit. This creates a market-based incentive for companies to reduce pollution and rewards those who are able to do so more efficiently. Laws banning polluting activities may be effective, but can be difficult to enforce and may not incentivize reductions in pollution. Tax credits for pollution control equipment and direct regulation also do not necessarily create market incentives for pollution reduction. Open market operations typically refer to monetary policy actions taken by central banks and are not directly relevant to pollution reduction policies.

A Market-Based Approach for Reducing Pollution to a Specific Overall