Describe the idea behind the cap-and-trade program for improving environmental quality. Explain how supply and demand determine the price for pollution rights in this case

Please provide the best answer for the statement.

The cap-and-trade program is a market-based approach for improving air or water quality. An appropriate pollution-control agency determines the amount of pollutants that firms can discharge annually into the water or air of a specific region while maintaining the water or air quality at some acceptable level. Then the rights to pollute are made available for sale each year. The quantity of these pollution rights is capped so that the supply is perfectly elastic. The down sloping demand curve in combination with the inelastic supply determines the price for these rights. At higher prices, fewer pollution rights are demanded since firms substitute pollution-abatement equipment for pollution rights. Over time, as demand increases, so would the price for these rights; however, the amount of pollutants would remain at the predetermined level.