(Last Word) In a cap-and-trade program,
A) government fixes the price of pollution rights and firms choose how many permits to purchase.
B) government fixes the maximum amount of a pollutant that firms can discharge and issues permits that firms can buy from and sell to each other.
C) each firm is provided a fixed number of permits for a particular pollutant and no individual firm is allowed to acquire additional permits.
D) firms can emit whatever type of pollutant they want, so long as the total tonnage does not exceed a government-established quantity.

Question

Quizplus · Accepted Answer

In a cap-and-trade program, the government sets a limit (or cap) on the total amount of a pollutant that can be emitted within a certain time period. This limit is divided into individual permits that companies can buy and sell amongst each other. By allowing firms to buy and sell permits, the market determines the price of pollution and incentivizes companies to reduce their emissions to lower their cost of compliance.

(Last Word) in a Cap-And-Trade Program