The diagram below shows a market for tradable pollution permits.
Figure 17- 7
-A policy that puts a price on greenhouse- gas (GHG)emissions will help to reduce emissions because

Question

The diagram below shows a market for tradable pollution permits.
  Figure 17- 7
-A policy that puts a price on greenhouse- gas (GHG)emissions will help to reduce emissions because

Quizplus · Accepted Answer

Putting a price on greenhouse-gas emissions through a market for tradable pollution permits provides incentives for firms and consumers to switch to cleaner energy sources. This is because firms will seek to reduce their emissions to avoid having to purchase additional permits, while consumers will seek out cleaner products and services as prices rise for those with higher GHG emissions. This ultimately leads to a reduction in emissions. A and B are incorrect because putting a price on GHG emissions would not shift firms' marginal cost of abatement curves, but rather would affect the level at which those curves intersect with the market price for permits. D and E are also incorrect because putting a price on GHG emissions would not necessarily lead to an increase in world energy intensity or energy intensity of GDP.

The Diagram Below Shows a Market for Tradable Pollution Permits