Government intervention pollution permits

 What is meant by a tradable pollution permit scheme and what is its purpose?

A tradeable pollution permit scheme is a set of documents in which can be brought and sold which allow businesses the right to pollute a certain amount of gas

Government sets a desired level of pollution then releases a number of permits so low polluters can sell to high polluters

System is known as cap and trade

 

environmental policy designed to control pollution by setting a limit on total emissions and allowing firms to buy and sell the right to pollute.

How do tradable pollution permits work?

They can be brought and sold in between businesses giving them the right to pollute certain amounts of gas

Tradable pollution permits work through a cap-and-trade mechanism that uses market forces to reduce pollution efficiently.
 

Benefits of tradable pollution permits?

Cost-Effective Pollution Reduction

Certainty Over Total Emissions

Incentive for Innovation

Flexibility for Firms

Government Revenue

Gradual Environmental Improvement

Encourages Market Efficiency

advanatges of pollution permits

Flexible

Cost effective

Business friendly

disadvantages of pollution permits

Its hard to enforce

Only covers half of EU emissions

How do pollution permits compare with other government intervention? like indirect tax and regulation

	Advantage	Disadvantage	Pollution permits/carbon pricing
Indirect tax	raises pricing of polluting goods which reduces demand	No guarantee about the exact amount reduced	provides certainty over the price of pollution
Regulation	Clear rules guarantees pollution reduction	Inflexible; can be costly for firms not incentive to produce beyond the set limit	Pollution permits are more flexible and cost effective than strict regulation because firms can guarantee trade allowances