Question

A cap-and-trade policy is an efficient method of reducing pollution because a.only high-cost firms will be forced to reduce pollution. b.those who can reduce pollution relatively more cheaply will have an incentive to sell permits. c.those who can reduce pollution relatively more cheaply will have an incentive to buy permits. d.only low-cost firms will be forced to reduce pollution.

Answer 1

those who can reduce pollution relatively more cheaply will have an incentive to buy permits.

the government determines an acceptable level of pollution and then issues permits to pollute. A company receives credit for amounts it does not emit and can then sell this credit to other companies.

What is Cap and Trade policy ?

Cap-and-trade is a system that limits aggregate emissions from a group of emitters by setting a “cap” on maximum emissions.

• It is characterized as a market-based policy to reduce overall emissions of pollutants and encourage business investment in fossil fuel alternatives and energy efficiency.

Learn more about Cap and Trade policy here:

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