Question

When new technologies make cleaner production possible,

a) emissions would fall under a system of fees, but would not fall under a system of transferable emissions permits unless the government bought back some of the permits.

b) Emissions would fall under a system of permits, but would not fall under a system of fees unless the government raised them.

c) the price of transferable permits would rise.

d) the quantity of transferable permits would rise

e) the quantity of transferable permits would fall

Answer 1

A.) Emissions would fall under a system of fees, but would not fall under a system of transferable emissions permits unless the government bought back some of the permits.

When new technologies make cleaner production possible, emissions fees rise.

Emissions trading (also known as cap and trade) is a market-based approach to controlling pollution by providing economic incentives for achieving reductions in the emissions of pollutants.

A central authority (usually a governmental body) allocates or sells a limited number of permits to discharge specific quantities of a specific pollutant per time period.Polluters are required to hold permits in amount equal to their emissions. Polluters that want to increase their emissions must buy permits from others willing to sell them. Financial derivatives of permits can also be traded on secondary markets. Tradable permits address the commons problem by rationing access to the resource and privatizing the resulting access rights. So, governement bought back some of the permits.