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What is a permit in economics?

The concept of using a permit market to control pollution levels was first developed by Canadian economist John Dales and American economist Thomas Crocker in the 1960s. Through this method, pollution permits are issued to firms in an industry where a reduction in emissions is desired.

Do tradable pollution permits work?

With a tax, firms may decide to pass on higher prices to consumers to cover the cost of the tax rather than reducing production. This means a tax may be ineffective since it has unintended consequences and so, although tradable permits may raise prices, they are guaranteed to reduce carbon emissions.

How do tradable permits work?

Tradable permits give the holder the right to pollute a certain amount, to buy permits if emissions increase, and to sell permits if emissions decrease. One version of tradable permits is to lease the permit at a market auction. Tradable Permit - an overview | ScienceDirect Topics sciencedirect.com topics tradable-permit sciencedirect.com topics tradable-permit

What is a permit trading?

Permit trading comes to replace existing environmental policy, while credit trading builds incrementally on extant policy by using it (as a baseline) to calculate the transferable emission reductions. Permit Trading - an overview | ScienceDirect Topics sciencedirect.com topics permit-trading sciencedirect.com topics permit-trading

What is an example of a tradable permit system?

The most emblematic example of a tradable permit market for controlling pollutant emissions is the one for sulphur dioxide (SO2) emissions from thermal power plants in the United States. These emissions are responsible for acid rain (the Acid Rain programme)1.

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