Question

A pollution offset provides

a.a charge for total emissions

b.a positive incentive to encourage firms to reduce emissions beyond the required amount

c.an incentive payment to increase emissions

d.the same incentive to reduce emissions as a pollution tax

Buying and selling of pollution permits can be set up as a

a.deposit-refund system

b.two-part tariff

c.cap-and-trade

d.all of the above

Emissions rate trading

a.is effectively the same as cap-and-trade

b.sets an overall limit on allowable emissions

c.regulates emissions in relation to total output of a firm

d.all of the above

Cap-and-trade

a.will lead to firms trading permits until each participants marginal abatement cost is equal to the permit price

b.involves a centralized decision on the aggregate allowable emissions

c.allows firms to emit more than their initial allocation if they buy more permits

d.all of the above

Firms with higher relative abatement costs will tend to be sellers of emissions permits.

a.True

b.False

Answer 1

A pollution offset provides

ans: d.the same incentive to reduce emissions as a pollution tax

Buying and selling of pollution permits can be set up as a

ans: d.all of the above

Emissions rate trading

ans: d.all of the above

Cap-and-trade

ans: d.all of the above

Firms with higher relative abatement costs will tend to be sellers of emissions permits.

ans: false

Higher abatement costs means that the cost of reducing pollution is higher and thus the firm wouldnt want to reduce pollution and hence buy more permits for compensating it. They will buy and not sell