Argument: Carbon trading encourages efficient emissions reductions
"Artificial Emissions Market: Core idea: some firms can reduce pollution more cheaply than others. One firm may have to pay $100,000 to reduce pollution by 5 tons of sulfur dioxide. An 2nd firm may have to pay $1,000,000 to achieve the same pollution reduction. Focusing on reducing pollution, rather than requiring all firms to take the same actions, reduces pollution at a lower cost. If my firm can reduce pollution at $25/ton, & your firm costs $50/ton, I sell allowances to you somewhere between $25 and $50. If the price is $40 a ton, I make a $15/ton profit, and you cut costs by $10/ton. We both win & pollution is reduced. It is economically efficient."