Transferable emission permit schemes provide the same incentive to invest in R&D to find cheaper methods of reducing emissions as emission taxes that achieve the same level of abatement.

Question

Quizplus · Accepted Answer

Transferable emission permits and emission taxes both create a market-based incentive for firms to reduce their emissions in the most cost-effective way possible. This means that firms will have a strong incentive to invest in research and development to find cheaper ways to reduce emissions, as it will allow them to offset the cost of purchasing permits or paying taxes. Therefore, transferable emission permit schemes do provide the same incentive to invest in R&D as emission taxes.

Transferable Emission Permit Schemes Provide the Same Incentive to Invest