LS21 - Tradable Pollution Permit Flashcards
What does a limit/cap do?
Sets the total amount of pollution that firms are allowed to emit over a period of time
How does a tradable pollution permit work?
Government allocates pollution permit (free or at a cost)
Government monitors emissions over time
What does a pollution permit do?
Allows firms to pollute up to the limit set
What happens when firms pollute at different levels?
If firms pollute below set levels, permits aren’t used so they can be sold
If firm breaks pollution limit, they will face fines unless they buy more permits
What are the advantages of the Cap & Trade Scheme?
Market creates for buying and selling of these permits
- incentivised to invest in pollution-reducing - - technology rewarded if eco-friendly
- be punished if they pollute to much
How does a cap and trade scheme introduce incentives?
Unused permits can be sold or banked
