Under a system of marketable pollution permits, a firm with high abatement costs will buy permits from a firm with low abatement costs.

Marketable pollution permits result in an advantage because the government is not needed to determine the accurate price of every pollutant when establishing specific environmental objectives. Once the government has determined a specific target to be accomplished, the market will automatically set the price. As a result, trading occurs since businesses with high abatement expenses will find it convenient to purchase permits from other businesses rather than to cut their emissions. Similarly, businesses will low abatement expenses will be prepared to sell their permits.