pg 291

Marketable Permits

A system that allows firms to buy and sell permits to emit a certain quantity of pollution.

Cap-and-Trade

A market-based approach to controlling pollution by providing economic incentives for reducing emissions.

Pollution Standards

Regulations set by the government to limit the amount of pollutants that can be emitted into the environment.

Shrinkable Permits

Permits that decrease the allowable emissions over time to encourage ongoing reductions in pollution.

Emission Reduction

The process of decreasing the amount of pollutants released into the environment by firms.

Firm Gamma

A company that successfully reduced its lead emissions from 600 tons to 200 tons and sold excess permits.

Firm Beta

A company that reduced its lead emissions from 400 tons to 200 tons without needing to buy or sell permits.

Firm Alpha

A company that reduced its lead emissions from 200 tons to 150 tons but chose to buy permits instead of further reducing emissions.

Firm Delta

A new company that had to purchase permits to emit 50 tons of lead to start production.

Total Pollution Decline

The overall reduction in pollution levels achieved through the trading of marketable permits.

Cost-Effective Reductions

The principle that firms with lower costs of reducing emissions will do so more than those with higher costs.

Clean Air Act Amendment (1990)

A revision of the law aimed at reducing sulfur dioxide emissions from power plants due to environmental concerns.