Pollution Permits

Question 1

How do pollution permits operate?

Answer 1

• The government issued a set of pollution permits

• The pollution permits are tradable

• Incentivises reduction of pollution to sell on pollution permits

• Government gradually decreases number of permits

Question 2

The company which finds it cheapest to reduce pollution…?

Answer 2

The company which finds it cheapest to reduce pollution is encouraged to do so

Question 3

Issues with pollution permits?

Answer 3

• Monitoring
• Administration Costs
• How to distribute permits?

Question 4

Demand Definition

Answer 4

Quantity of a good or service that consumers are willing to buy at any given price