Question

Which of the following statements about the cap and dividend policy is not true?
a.
The number of issued permits under the cap and dividend policy increases year to year.
b.
The cap and dividend policy sets a limit on total carbon emissions.
c.
The cap and dividend policy works by issuing limit permits.
d.
Carbon emissions will likely decrease over time as a result of a cap and dividend policy.

Answer 1

Answer: a.

Explanation: Cap-and-dividend (a form of cap-and-trade) sets a cap on total emissions and issues that many permits, with the cap typically falling over time so permits **decrease**, not increase. The cap limits emissions and revenues from permits are returned to households as dividends, so b, c and d are true.