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Unformatted text preview: Cap and Trade Government or internaDonal treaDes set a cap on total emissions. Companies can buy a limited amount of emission permits from the government, which combined are equal to the cap. Companies are allowed to trade or sell their emission permits to other companies. This sets up incenDves for a company to lower its emissions below the cap, as the company can make money off of selling the unused permits to other companies. Typically the total number of permits is progressively lowered over some period of Dme. The Cap & Trade system set up by the Acid Rain Program counts polluDon as an externality of a business, that is a cost to society produced by the business, but that the business producing it usually does not have to bear. The cap and trade system addresses this by selng up emission trades. Crucial to the success of this management strategy was that it did not mandate how the emission standards were to be met,...
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This note was uploaded on 01/30/2014 for the course IB 105 taught by Professor Caceres during the Fall '08 term at University of Illinois, Urbana Champaign.

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