Describe how a pollution-control authority might use an emissions permits system to reduce pollution

An authority could create a permit for a specified quantity of a specific pollutant, such as a ton of sulfur dioxide of air pollution or a pound of sewage entering the water. The permits could be offered for sale in limited quantities fixed by the authority at prices set by supply and demand. (Supply is totally inelastic in this market.) The permits can be auctioned off to the highest bidder. Polluters have the choice to buy a permit or clean up and do without. It is a price-based approach, which tends to be efficient. It has the further advantage of reducing pollution to a known, specific amount based on the number of permits. It has the disadvantage of being viewed as a "license to pollute" and may be unpopular with the public.