A government attempting to reduce industrial sulfur dioxide emissions through a tradeable pollution permit scheme may fail to achieve this objective if:
firms must legally acquire permits in proportion to their total sulfur dioxide output.
firms that successfully cut emissions are permitted to trade their spare allowances on an open market.
the overall limit on the total number of permits issued is set too high to restrict current emission levels.
firms invest in cleaner, modern capital equipment to minimise their requirement for permits.
