Question

If businesses are permitted to sell pollution rights, would brokers in pollution rights emerge? Why or why not? Would brokers increase the efficiency with which pollution is cleaned up.

Answer 1

If businesses are permitted to sell pollution rights, it is almost inevitable that brokers emerge if the sale of these rights takes place in the free market(unlikely if the government serves as the broker and creates it's own marketplace).Brokers will emerge since firms are unlikely to have efficient communication channels to gauge supply and demand for pollution rights or to determine a fair value for them at any given point of time. Brokers will solve these inefficiencies by creating a marketplace where information is freely available which means that all firms get to trade globally or nationally which allows for an even fairer price setting mechanism.If the sale of pollution rights is effective at cleaning up pollution, brokers will increase the fficiency with which pollution id cleaned up. If it is not, the brokers wont have any impact either.