P11–35 ETHICS PROBLEM The Environmental Protection Agency sometimes imposes penalties on firms that pollute the environment (see the Focus on Ethics box on page 000).

But did you know that there is a legal market for pollution? A mechanism that has been developed to limit excessive air pollution is to use carbon credits. Carbon credits are a tradable permit scheme that allows businesses that cannot meet their greenhousegas-

emissions limits to purchase carbon credits from businesses that are below their quota. By allowing credits to be bought and sold, a business for which reducing its emissions would be expensive or prohibitive can pay another business to make the reduction for it. Do you agree with this arrangement? How would you feel as an investor in a company that uses carbon credits to legally exceed its pollution limits?