Consider a coal-fired electric-power plant that is operating under a system of tradable pollution permits (and the firm currently owns permits). If its marginal cost of pollution abatement is $100 per unit and the price of the permit is $150 per unit, this firm will
◦ buy more permits and abate more pollution.
◦ sell permits and abate more pollution.
◦ not abate at all.
◦ buy more permits and abate less pollution.
◦ not buy any permits, since that would push up its costs.