With tradable pollution licenses to control pollution,reductions in total pollution
A)Can be achieved by having government buy back some of the licenses
B)Can be achieved by having government sell more licenses
C)Requires the government to buy back all existing licenses and re-issue new licenses
D)Cannot be achieved
E)Is never economically optimal

Question

Quizplus · Accepted Answer

By having the government buy back some of the licenses, it reduces the total amount of licenses in circulation, making them more valuable and increasing the cost of polluting. This incentivizes companies to reduce their pollution levels to avoid expensive license purchases, ultimately leading to a reduction in total pollution.

With Tradable Pollution Licenses to Control Pollution,reductions in Total Pollution