Th1.4: Advantages of Tradable Pollution Permits

Question 1

What are the four advantages?

Answer 1

guaranteed pollution will fall
raise revenue
green tech
efficiency

Question 2

Guaranteed pollution will fall:

Answer 2

since the government caps the number of permits, pollution will fall to the targets set by the government, maximising social welfare

Question 3

Raise revenue:

Answer 3

the government can raise revenue by selling permits and by fining firms who exceed their pollution limit

Question 4

Green technology

Answer 4

encourages companies to use green tech

Question 5

Efficiency

Answer 5

firms are able to make their own decisions about whether to cut pollution or buy more permits. this helps encourage efficiency