Definition
- Pollution charge
- A pollution charge is a tax imposed on the quantity of pollution that a firm emits.
- Not to be confused with: Tradable pollution permit
- A tradable pollution permit allows a firm to emit a set quantity of pollution, and firms can buy and sell these permits among themselves.
Test yourself
What is the difference between pollution charge and tradable pollution permit?
Permits fix the quantity of pollution and let its price vary; a charge fixes the price of polluting and lets the quantity vary.