ABSTRACT
One logical way to control aggregate levels of emissions or harvest is to set a total number of permits or quotas to adapt to the assimilative capacity of the environment or the sustainable harvest yield, respectively. Setting totals while allowing for some dynamics in the economy due to population growth, changing technology, mobility, and economic growth means that the allocated permits must be transferable. Otherwise, the allocation of all available rights would make all new activities impossible by definition. Tradability also allows the efficiency of the market mechanism to be harnessed to ensure that marginal benefits and costs are equalized.
