A market for pollution permits can efficiently allocate the right to pollute by the forces of supply and demand.

Question

Quizplus · Accepted Answer

A market for pollution permits creates a monetary value for the right to pollute and allows companies to trade permits according to their relative cost of reducing emissions. This incentivizes companies to reduce their pollution to the most cost-effective level while allowing those who need to emit more to purchase permits from those who can emit less. This system is designed to generate an efficient outcome through the forces of supply and demand.

A Market for Pollution Permits Can Efficiently Allocate the Right