**(Tradeable) Permits** The fact that you can correct for externalities with (tradeable/marketable) permits seems to be a consensus with economists. But considering the existing applications, the theory appears to be not common sense. Example: The EU/countries in the EU have implemented a [Carbon Emission Trading scheme][1] while nations within the EU continue with other regulation like promotion of solar/wind, etc. When the point of a permit trading scheme is for the market to allocate the efforts to that place where you can save CO2 most efficiently. The added regulation only distorts the permit market without actually helping to reduce the CO2 produced, as the amount of CO2 produced is set by the amount of permits issued. And by funding solar, you just make permits cheaper and increase pollution in another sector. Another quirk is, that permits are grandfathered to companies to keep the prices down, when the gifted permits result in an opportunity cost of using them (since you could sell them at the same price), making the price rise at just the same rate as if the company had bought them. The only result of grandfathering being that it gifts money to established companies, distorting the market. [1]: https://en.wikipedia.org/wiki/Carbon_emission_trading