Question

what are the different ways in which tradable permits are used to reduce pollution emission levels as opposed to the ways in which permits are used to reduce pollution concentration levels?

Answer 1

The different ways in which tradable permits are used to reduce pollution emission levels are :

• It is possible to make new rules where every player would try to reduce the emissions by a certain percenatge and the defaulters would be fined.
• by imposing a tax, where each player would pay a tax equivalent to the amount of emissions. So a firm with less emissions would have an incentive over the firm with higher level of emissions. the firm would keep reducing the pollution emission level till the marginal cost of reduction becomes higher than the amount of tax paid to the government.