Definition
- 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.
- Not to be confused with: Pollution charge
- A pollution charge is a tax imposed on the quantity of pollution that a firm emits.
Test yourself
What is the difference between tradable pollution permit and pollution charge?
Permits fix the quantity of pollution and let its price vary; a charge fixes the price of polluting and lets the quantity vary.