Which of answer best explains how the market for tradable allowances in pollution works?
A) Firms are given a particular dollar subsidy value to clean up pollution, and they can trade these subsidies between themselves if they fall below or surpass the limits.
B) Firms are taxed a particular percentage rate according to how much they pollute, and they can trade the pollutants to reduce the effective tax rates they pay.
C) Firms are required to stick to particular production levels, and if they go beyond these production levels, they are charged a percentage of their profits.
D) Firms are given a particular allowance amount of pollutants, and if they fall below or surpass these targets they can trade their available allowances with other firms.

Question

Quizplus · Accepted Answer

Tradable allowances work by setting a limit on the amount of pollutants firms can produce, by giving them a specific allowance amount. Firms that produce less pollution can sell their unused allowances to firms that produce more pollution, allowing the latter to continue operating while reducing overall pollution levels.

Which of Answer Best Explains How the Market for Tradable