What Is the Rationale Behind a Marketable Emission Allowance Scheme

question 95

Multiple Choice

What is the rationale behind a marketable 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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Definitions:

Cost Driver

An activity or factor that incurs costs based on its level of usage or volume, playing a critical role in activity-based costing.

Allocated Equally

The process of distributing resources, costs, or assets in equal portions among recipients or activities.

Internal Price Wars

Competitive pricing tactics within an organization or amongst subsidiaries that aggressively lower prices, potentially harming the organization's overall profitability.

Decentralization

The delegation of decision-making authority from central management to lower levels in the organizational hierarchy, often to improve the responsiveness and flexibility of a company.