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Marketable permits are instruments aimed at reducing pollution on an individual level. The permits represent a quota of pollutant that the permit-holding individual or organization is allowed legally to emit, and may also be bought or exchanged with other permit-holders for financial considerations. The laws of supply and demand apply to such exchanges, with a national or international regulatory scheme monitoring observance of permit limits and, when necessary, reducing the total number of permits in circulation to cut down on pollution. Many firms find this system a powerful incentive to make their operations cleaner and more efficient because they will not exceed their permitted levels of emissions, and because the unused permit or some portion of it becomes a commercially valuable asset.

This system combines two ...

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