Economics (AS & A Level) · May / June 2021 · Paper 32 · Question 14

A government intends to use pollution permits to reduce environmental damage. Under what circumstances is this policy most likely to fail to achieve the intended reduction?

1. AFirms within the scheme are required to have a sufficient number of permits to cover the amount of pollution generated in production.
2. BFirms improve their technology to reduce the number of permits they require.
3. CFirms that do not use all of their permits can sell some of them to other firms.
4. DThe permits do not impose strict enough limits on carbon emissions.

As printed in the paper