What Is the Rationale Behind a Tradable Emission Allowance Scheme

Multiple Choice

What is the rationale behind a tradable emission allowance scheme?

A) to create a market for externalities: the scheme brings together buyers and sellers of marketable permits
B) to discipline polluting firms by specifying the maximum amount of emissions allowed and giving them permits to pollute up to their allowance
C) to raise revenue for the government through the sale of emission permits and at the same time set an emissions target
D) to provide firms with the incentive to consider less costly alternatives to pollution reduction by making firms pay for the right to pollute beyond their specified allowance