17. How do tradeable rights work?

17. How do tradeable rights work?

Answer

This has the same purpose as corrective tax - to encourage better practice over time. Under this type of regime (analogous to the Emission Trading Scheme) quotas are issued for the right to pollute. Over time the total quota issued for any pollution type would diminish. The rights to pollute would be issued by auction and thereafter tradeable on a secondary market. Proceeds from the auction would accrue to a fund that finances clearing up consequences of environmental damage. The idea is that the most profitable activities will be able to afford to pay the most for pollution rights. Again it’s about making economic activity compatible with environmental sustainability. As the lid on the number of pollution rights issued sinks, only the most profitable firms survive.