Tradable permits for the control of sulphur oxides in Canada

In the economic literature, tradable permit systems have been shown to resolve certain environmental problems efficiently, but they are seldom found in practice. The usefulness of such a system for the control of acid rain in Canada is discussed. The problem of market structure is examined by way of a numerical example involving two large firms. It is found that the firms will have different preferences as to the distribution rule. As well, when the market is concentrated, as in Canada, the properties of economic efficency cannot be guaranteed for regimes based on free distribution of permits to pollution sources. It is also shown that a zoned emission permit system would appear to be the most useful in the Canadian system. 14 refs., 2 tabs