Government Intervention

Question 1

What are 5 different ways Government can intervene?

Answer 1

-Taxation
-Subsidies
-Fines
-Regulations
-Pollution Permits

Question 2

Are pollution permits tradeable?

Answer 2

Permits are tradable

-A business can sell its pollution permits to another business if it can successfully reduce its own levels of pollution.

Question 3

What are the advantages of pollution permits?

Answer 3

+ Efficient as uses market mechanism
+ Profit incentive/motive to invest in green technology
+ Supply fixed. Permits issued to match cap.

Question 4

What are the disadvantages of pollution permits?

Answer 4

• Imperfect info with regards to number of permits to issue. Too few or too many
• Cost of permit administration high
• Difficult to measure pollution levels.