What are the Disadvantages of Trading Pollution Permits

-What is the Optimal Pollution Level? If it is too high, Firms have No Incentive to Lower Emissions. Too Low and Firms may be Unable to Start or Relocate elsewhere. This can cause Government Failure -Creation of a New Tradable Permit, which could internalise Market Failure -Pollution may still exist in Certain Areas. Harmful to the Environment -Administrative Costs may be Expensive to both Governments and Firms