Question

Is zero pollution possible under a marketable permits system? Why or why not?

Short answer

Under a marketable permits system, zero pollution is generally not achievable due to the high costs and technological limitations associated with completely eliminating pollution emissions. The system aims to find a balance between environmental protection and economic concerns by determining the optimal level of pollution reduction, considering the trade-offs involved. While it incentivizes firms to minimize their emissions and allocate resources to the most cost-effective pollution abatement measures, achieving zero pollution is often technologically unfeasible or extremely costly for many firms.

Step-by-step solution

Introduction to Marketable Permits System

A marketable permits system is an environmental policy tool used by the government to control pollution levels by setting a limit on the total allowable pollution emissions for an industry. Under this system, firms or businesses are issued permits allowing them to emit a certain amount of pollution. The total number of permits issued is restricted, and businesses can buy, sell, or trade them. This creates an economic incentive for firms to reduce their pollution levels, as they can make money by selling their unused permits to other firms.

Possibility of Achieving Zero Pollution

While the marketable permits system creates incentives for firms to reduce pollution, it doesn't generally lead to zero pollution. The main reason behind this is that achieving zero pollution is often technologically unfeasible or extremely costly for many firms. The government determines the total allowable pollution level based on what it perceives as an acceptable level of emissions, considering both the costs and benefits of pollution control. If the government were to set a goal of zero pollution, the cost of complying with this requirement would be excessively high for many firms, resulting in potential loss of jobs or businesses being forced to shut down. Some level of pollution is, therefore, tolerated in favor of economic benefits like job preservation or maintaining economic competitiveness.

Tradable Permits and Environmental Goals

The marketable permits system is designed to achieve a specific environmental goal, usually a reduction in overall pollution emissions. Tradable permits can result in a more cost-effective and efficient way to reach this goal, as firms that can easily reduce their emissions do so and sell their permits to firms with higher pollution abatement costs. This system ensures pollution is reduced at the lowest possible cost to society. However, as previously mentioned, it doesn't typically aim for zero pollution. The marketable permits system is more focused on finding a balance between environmental protection and economic concerns, and determining the optimal level of pollution reduction considering the trade-offs involved. In conclusion, zero pollution is generally not achievable under a marketable permits system due to the high costs and technological limitations associated with completely eliminating pollution emissions. However, the system does provide an efficient way to reduce pollution levels by incentivizing firms to minimize their emissions and allocating resources to the most cost-effective pollution abatement measures.