What is the rationale behind a cap-and-trade emission allowance system?
A) It creates a market for externalities.
B) It disciplines polluting firms by specifying the maximum amount of emissions allowed and gives them permits to pollute up to their allowance.
C) It provides firms with the incentive to consider less costly alternatives to pollution reduction by making firms pay for the right to pollute beyond their specified allowance.
D) It raises revenue for the government through the sale of permits.
Correct Answer:
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