Economics » Environmental Protection and Externalities » Market-Oriented Environmental Tools

Key Concepts and Summary

Key Concepts and Summary

Examples of market-oriented environmental policies, also referred to as cap and trade programs, include pollution charges, marketable permits, and better-defined property rights. Market-oriented environmental policies include taxes, markets, and property rights so that those who impose negative externalities must face the social cost.


marketable permit program

a permit that allows a firm to emit a certain amount of pollution; firms with more permits than pollution can sell the remaining permits to other firms

pollution charge

a tax imposed on the quantity of pollution that a firm emits; also called a pollution tax

property rights

the legal rights of ownership on which others are not allowed to infringe without paying compensation

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