The Coase theorem does not apply to a tradable permits system.

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The Coase theorem can apply to a tradable permit system if there are clearly defined property rights and low transaction costs for bargaining and trade. In fact, the concept of tradable permits was partly inspired by Coase's ideas about market-based solutions to externalities. However, the effectiveness of the Coase theorem may be limited in cases where there are many individual polluters or where the environmental impacts are diffused and hard to quantify.

The Coase Theorem Does Not Apply to a Tradable Permits