A TEP system is introduced to lower Sulphur pollution from an initial level of 120,000 to 80,000 tons per year. Polluters are given emission permits in proportion to their initial level of emissions (30 to firm A and 50 to firm B). Polluters will have an incentive to trade permits as long as their MACs differ at each one's emission levels. $ 400- 200 120 75 30 0 MACA-120-3EA (a) 30 40 EA Emissions from Firm A (thousand tonnes SO) 15 $ 400 200 150 ..75 (b) MACH = 400-SEB 25 50 C Emissions from Firm B (thousand tonnes SO) 1 1 65 80 Ep