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what is the role of tradeable permits?

what is the role of tradeable permits?

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Answer #1

Tradable permits are issued by the firm who have polluted less and are brought by the firms who have crossed their pollution limits in the market. A firm that have polluted less will be incentivised by selling the tradable permits in the market and the firm that buys those limits will have to pay extra cost if they are polluting more than the allowed limits.

Tradable permits act as a tool between the less polluting and more polluting firms to encourage less pollution in the market.

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