The 2005 European Union Emission Trading Scheme is an example of a
A) positive externality.
B) command and control system.
C) Coasian solution to pollution control.
D) cap-and-trade system.

Question

Quizplus · Accepted Answer

The 2005 European Union Emission Trading Scheme is a cap-and-trade system. This means that there is a cap or limit on the total amount of emissions that are allowed, and companies must obtain permits for their emissions. If a company emits less than its permitted amount, it can sell its unused permits to other companies that need them. This creates a market-based incentive for companies to reduce their emissions, as they can profit from selling unused permits.

The 2005 European Union Emission Trading Scheme Is an Example