Under a system of marketable pollution permits

Question

Quizplus · Accepted Answer

Under a system of marketable pollution permits, firms are allowed to buy and sell the right to pollute a certain amount. This incentivizes firms to reduce emissions and become more efficient in their production processes, as they can profit by selling unused pollution permits to other firms in need. The government may be involved in setting overall pollution limits and distributing initial permits, but the market forces of supply and demand ultimately determine the price and quantity of permits. As a result, pollution levels can decrease over time as firms compete to reduce their emissions and sell unused permits to others.

Under a System of Marketable Pollution Permits