SATHEE: Environment And Sustainable Development Ques 39

Environment And Sustainable Development Ques 39

A) It involves a mechanism whereby me permits available are initially distributed to producers who are potential emitters of a given pollutant

B) The price mechanism for tradable emissions permits helps to allocate the restricted supply of permits to those who most value them

C) All producers are required to be equally efficient in reducing emissions of the pollutant

D) The right to pollute can be transferred between different parties at a price determined by the market in tradeable emissions permits

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Correct Answer: C

The point here is that typically firms will be unequally efficient in reducing emissions, and the trading mechanism will over time create a situation where the least environmentally efficient firms will have to buy permits to cover their excess emissions, and this will give them an incentive to move to less polluting production methods.