What Is the Rationale Behind a Tradable Emission Allowance Scheme

question 260

Multiple Choice

What is the rationale behind a tradable emission allowance scheme?

• A)to create a market for externalities: the scheme brings together buyers and sellers of marketable permits
• B)to discipline polluting firms by specifying the maximum amount of emissions allowed and giving them permits to pollute up to their allowance
• C)to raise revenue for the government through the sale of emission permits and at the same time set an emissions target
• D)to provide firms with the incentive to consider less costly alternatives to pollution reduction by making firms pay for the right to pollute beyond their specified allowance

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