Question

Pollution taxes and tradable pollution permits are more efficient forms of regulation than pollution limits because:

Taxes and tradable permits cause firms with lower abatement costs to pollute less than firms with higher abatement costs

Taxes and tradable permits cause a greater reduction in pollution than pollution limits

Taxes and tradable permits increase firms’ marginal costs

Taxes and tradable permits reduce firms’ marginal costs

Taxes and tradable permits cause firms with lower abatement costs to pollute more than firms with higher abatement costs

Answer 1

Pollution taxes and permits are efficient than that of government limits, because;
*Taxes and permits reduces pollution than limits.
*Taxes and tradeable permits raises MC of firm.
*Tradable permits and taxes cause lower abatement cost firms to pollute more than with higher abatement costs firms.
In order to eliminate negetive externality like pollution. The introduction of pollution taxes for negative externality and subsidies for not polluting(positive externality) is a better method than government controls and limits.
Taxes on emissions and pollution reduces output and firm can sell and purchase tradable permits. Thus it becomes an incentive of firm not to pollute more and can have the provision to sell tradable limits. The introduction of carbon taxes reduces the overall emissions of carbon in several countries. The government limits are not efficient because it requires a strict laws and regulations.