Tradable Permits
Definition of Tradable Permits
The contemporary economists attempt to achieve environmental objectives using market based policies or indirect taxes. The taxes and programs are developed because the government attempts to limit the overall pollution that factories and industries excerpt. The most important aspect of tradable permits is that they can be traded between firms. This market based system allows firms to reduce pollution at the lowest cost possible. Unlike command economies that specify which technology the firms are allowed to use to manufacture with. However, there are problems that are accompanied with this market based system of issuing permits. And moreover these conflicts cannot be avoided so easily. This essay analyzes the exact method that governments use to issue the permits and whether or not these permits really help the economy and the environment as much as they should. However, in order to analyze such an issue accurately, one would need to know exactly what tradable permits are and how they are used. The tradable permits are also known as tradable environmental allowances. The basic idea of issuing the permits is a variation on regulating negative externalities using indirect taxes. The actions that the permits allow can be categorized as the emitting or extracting of pollution. These permits allow industries to emit a certain level of pollution, if they exceed these levels then the firm would be forced to pay fines. Of course, an accredited verifier must verify the amount of greenhouse gases emitted. Otherwise the amount of greenhouse gases could not be monitored. An example of the attempted preservation of the environment may be, that an industry may only emit a tone of sulfur dioxide over a year but, next year the permit will lower the amount of sulfur that is allowed to be produced. Thus, firms most invest more money into machinery that is more environmentally friendly. Since tradable permits can be traded, the permit will move
The contemporary economists attempt to achieve environmental objectives using market based policies or indirect taxes. The taxes and programs are developed because the government attempts to limit the overall pollution that factories and industries excerpt. The most important aspect of tradable permits is that they can be traded between firms. This market based system allows firms to reduce pollution at the lowest cost possible. Unlike command economies that specify which technology the firms are allowed to use to manufacture with. However, there are problems that are accompanied with this market based system of issuing permits. And moreover these conflicts cannot be avoided so easily. This essay analyzes the exact method that governments use to issue the permits and whether or not these permits really help the economy and the environment as much as they should. However, in order to analyze such an issue accurately, one would need to know exactly what tradable permits are and how they are used. The tradable permits are also known as tradable environmental allowances. The basic idea of issuing the permits is a variation on regulating negative externalities using indirect taxes. The actions that the permits allow can be categorized as the emitting or extracting of pollution. These permits allow industries to emit a certain level of pollution, if they exceed these levels then the firm would be forced to pay fines. Of course, an accredited verifier must verify the amount of greenhouse gases emitted. Otherwise the amount of greenhouse gases could not be monitored. An example of the attempted preservation of the environment may be, that an industry may only emit a tone of sulfur dioxide over a year but, next year the permit will lower the amount of sulfur that is allowed to be produced. Thus, firms most invest more money into machinery that is more environmentally friendly. Since tradable permits can be traded, the permit will move