HGP250 Study Guide - Final Guide: Fossil Fuel, Root Mean Square, Rivet

• School: University of Alberta
• Department: Human Geography and Planning
• Course: HGP250
• Professor: Kurt Borth

Document Summary

Cap & trade is an environmental policy approach where the authority sets limits to a certain activity (like emission that causes pollution) and and creates a market. Cap & trade includes the tradable permit process where they can buy and sell teh allowances/licenses/permits. Instead of telling how to reduce pollution, they get permits of amount of pollution they can produce . Reducing pollution in this way has a lower cost. This reduces exactly same amount of pollution as command and control by using fewer other resources . Government does not know which one is the low cost plant. But that does not matter because the powerplant that can cheaply reduce pollutions sells permits and the power plant where it is expensive to reduce pollution buys permit. End result same amount of pollution but both rms increase their pro ts. Invisible hand of market gets to the ideal solution.