Which of the following is true regarding a cap-and-trade system? COPYRIGHTED MATERIAL. NOT TO BE SHARED. Question 31 options: It creates a market solution designed to correct a market failure. The first large-scale cap and trade system was implemented in the European Union. If MD = $50 and aggregate MAC = $30 when trading in permits stops, the government will have issued too many permits. Environmental justice would not be an issue with a cap and trade program for GHG emissions because GHG emissions are well mixed in the atmosphere and not concentrated in certain areas. One problem with a cap and trade system is that large rich polluters are likely to just continue buying permits instead of cleaning up their emissions. The negative externality will be internalized i.e., polluters will pay for their pollution even if all permits are allocated free. The social compliance cost of a cap and trade program is the sum of polluters' TAC plus the cost to polluters of buying permits to cover remaining emissions