Why Are Taxes on Pollutants and Tradable Allowances Considered to Have

Multiple Choice

Why are taxes on pollutants and tradable allowances considered to have similar effects in solving externality problems?

A) The companies who are taxed are also simultaneously subject to the allowances of pollutants.
B) They both reduce pollution of exactly the same types of pollutants.
C) They both bring markets closer to the efficient quantity.
D) Companies can trade the taxes on pollutants just as they trade the allowances on pollutant amounts.