Economics · Environmental Economics and Pollution Control

Which of the following statements regarding cap-and-trade systems and tradeable permits is/are correct? 1. In a cap-and-trade system, the government establishes a specific pollution cap and issues permits that firms can trade. 2. Firms with high abatement costs reduce their emissions to sell surplus permits, while firms with low abatement costs purchase them from the market. 3. This system allows the market to achieve efficient pollution levels, with the EU Emissions Trading System serving as a real-world example. Select the answer using the code given below: