Tradable pollution permits ?
Correct answer: D. Set the quantity of pollution
- A. reduce the incentive for technological innovations to further reduce pollution.
- B. set the price of pollution.
- C. determine the demand for pollution rights.
- D. Set the quantity of pollution
Explanation
A tradable-permit system fixes the total number of permits, and therefore the permitted quantity of pollution, while allowing firms to trade those rights. The market determines the permit price rather than the government setting it directly.
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