Robert Stavins' Model of Marketable Permits

Robert Stavins' Model of Marketable Permits is a system where governments set a total cap on pollution and issue permits allowing a certain level of emissions. These permits can be bought and sold among companies, creating a market. Firms that can reduce pollution cheaply will do so and sell their extra permits, while those with higher costs will buy permits. This approach incentivizes cost-effective pollution reduction, achieving environmental goals more efficiently than direct regulation. It leverages market mechanisms to encourage innovation and flexibility in meeting pollution targets.