Chapter 12: Problem 33

Is zero pollution possible under a marketable permits system? Why or why not?

Short Answer

Expert verified

Achieving zero pollution under a marketable permits system is highly unlikely due to the economic burdens caused by an extremely low cap on emissions and the uncertainties surrounding the availability and cost of pollution reduction technologies. While the system can incentivize companies to reduce pollution, the practical challenges posed by economic feasibility and technological limitations make it improbable to achieve zero pollution.

Step by step solution

1. Understand the concept of marketable permits

Marketable permits, also known as emissions trading or cap-and-trade, is a system where the government sets a limit (cap) on the total amount of pollution that can be released by companies. Companies are then issued permits for a certain amount of pollution, which they can use, buy, or sell. Essentially, companies that can reduce their pollution below their permit limit can sell their unused permits to other companies that need them.

2. Analyze the factors that impact pollution levels in a marketable permits system

Pollution levels under a marketable permits system are influenced by factors such as the cap set by the government, the distribution of permits, the price of permits, the cost of pollution reduction technologies, and the willingness of companies to adopt these technologies. Companies decide whether they invest in emission-reducing technologies or buy extra permits from the market, based on cost-benefit analysis.

3. Assess the possibility of zero pollution under the marketable permits system

Zero pollution under this system would require the cap set by the government to be very low or close to zero. However, this would lead to extremely high permit prices, making pollution reduction economically unfeasible for most companies. This could potentially cause companies to go out of business or face difficulties in keeping up with permit prices.

4. Consider the role of technological advancements

Technological advancements play an essential role in achieving reduced pollution levels. However, innovation in pollution reduction technologies is uncertain and often takes time. Even if new technologies emerge that can eliminate pollution, their adoption by companies will depend on the cost of implementation and the ease of adopting the technology.

5. Conclusion: Is zero pollution possible under a marketable permits system? Why or why not?

Based on the analysis, achieving zero pollution under a marketable permits system is highly unlikely. The cap set by the government would have to be extremely low, resulting in high permit prices and creating economic burdens on companies. The availability and cost of pollution reduction technologies also play a significant role in determining the pollution levels. While it is theoretically possible for a marketable permits system to incentivize companies to reduce pollution to zero, the economic feasibility and technological limitations pose significant barriers that are likely to prevent this from happening in practice.