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19 download_doc-24.php

19 download_doc-24.php - • The total industry supply of...

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G202 (4/15/2009) Tradable Pollution Permits Issuing pollution permits that pertain to a permissible level of pollution and then  let firms trade the permits as needed. Advantages: The overall level of pollution will be reduced  Permits go to those who value them most (high abatement cost firms)  Low abatement cost firms gain profits  Environmental groups can buy the permits and reduce pollution more  Tradable Pollution Permits
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Unformatted text preview: • The total industry supply of pollution permits (S) is split among the existing firms in the market (S = S 1 + S 2 ), and permits are traded at the going market price (P*). • Accountability and Incentives • Assigning accountability for a firm’s waste can alleviate external damages. • Secondary markets for waste products will evolve. • Example: “Beer for Bessie”...
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