Questions: To whom is a system of tradable permits generally more politically acceptable relative to Pigouvian taxes? Voters and members of the general public Politicians who want to fund expensive programs Energy firms to whom tradable permits are given Groups who advocate for pollution reduction

The answer is: Energy firms to whom tradable permits are given.

Explanation for each option:

1. Voters and members of the general public: Tradable permits might not be more politically acceptable to the general public compared to Pigouvian taxes. While both systems aim to reduce pollution, the public might be more familiar with taxes as a regulatory tool. Tradable permits can be seen as complex and may not directly resonate with voters who are concerned about environmental issues.

2. Politicians who want to fund expensive programs: Politicians might prefer Pigouvian taxes over tradable permits if they are looking to fund expensive programs. Pigouvian taxes generate direct revenue for the government, which can be used to finance various initiatives. Tradable permits, on the other hand, do not inherently generate revenue unless the permits are auctioned.

3. Energy firms to whom tradable permits are given: Tradable permits are generally more politically acceptable to energy firms because they provide flexibility and potential cost savings. Firms can trade permits among themselves, allowing them to find the most cost-effective way to reduce emissions. Additionally, if permits are initially allocated for free, firms may perceive this as a less burdensome approach compared to paying taxes.

4. Groups who advocate for pollution reduction: While groups advocating for pollution reduction might support tradable permits as a means to cap and reduce emissions, they may also favor Pigouvian taxes if they believe taxes will more effectively internalize the external costs of pollution. The acceptability of tradable permits to these groups depends on how the permits are implemented and enforced.