Th1.4: Tradable Pollution Permits

Question 1

What does a pollution permit allow an owner to do?

Answer 1

pollute up to a specific amount of pollution

Question 2

Who controls how many permits there are and therefore what?

Answer 2

the government and so limit the maximum amount of pollution

Question 3

Why would companies resort to using greener technology?

Answer 3

they have to buy permits in order to pollute, so they may switch to green tech to cut costs and increase profit

Question 4

What can be done with unused permits?

Answer 4

they can be sold to other companies, hence why they are tradable

Question 5

What will happen to companies exceeding their limit of pollution?

Answer 5

they will face legal action

Question 6

What happens as a fixed supply of permits is allocated?

Answer 6

an increase in demand will lead to an increase in price in permits, so companies will have more incentive to cut emissions by using green tech