LS21 - Tradeable Pollution Permits

Question 1

Pollution Permits

Answer 1

The government allocates pollution permits to firms, which can be traded. Permits can also be sold to generate a revenue

Question 2

Why might firms want to produce less emissions?

Answer 2

If a firm were to lower its emissions, it can trade or sell its permits to generate a revenue and gain a higher profit

Question 3

Advantage of Using Tradeable pollution permits

Answer 3

• Benefits the government in the long run
• Allows the firms to raise revenue from the sale of pollution permits

Question 4

Disadvantage of using tradeable pollution permits

Answer 4

• Firms may pass on the higher cost of production onto consumers
• Expensive to enforce, admin costs