Question

For tradeable pollution permit markets to work well,

a.there must be enough buyers and sellers to support competition

b.there must be effective monitoring

c.both of the above

d.neither of the above

Monitoring of polluters under an emissions trading system is more difficult and costly than with emissions charges.

a.True

b.False

Which of the following is true?

a.Cap-and-trade is a quantity based system.

b.Cap-and-trade is a price based system.

c.A program of emissions charges is a price based system.

d.Both the first and third answers are true.

Answer 1

1> A

Reason

For tradable permits to succeed, there is no need of monitoring, it is a market mechanism, so having a lot of buyers and sellers will solve the problem.

2> False

Monitoring of polluters in an efficient trading of pollution is easier. It is because the government will have the data beforehand of the total emission that the firm can emit at max. But, for emission charges, government do not have any information and thus, it is difficult for them to monitor.

3> d.Both the first and third answers are true.

In case of cap and trade, each firm is alloted the amount of pollution it can emit and it has to purchase permits to produce more, so it is quantity based system. On the other hand, emission charges is a price based system since it charges a price based on the pollution emitted.

3>