The corrective tax is when government taxes the creation of a new product. The tradable pollution permit is when government makes a new product available for production.
Tradable pollution permits are very popular because they ensure that a new product is made available without requiring a huge amount of government revenue. They are also popular because they make it easier for companies to start producing new products and making them available to the public without having to pass a tax on to them. The only problem is that because they are tradable, they are not taxable.
What happens when a company sells a tradable pollution permit which gets sold to a third party? The third party can then sell it for a profit to someone else, who then can sell it to someone else, and so forth. This is the problem with tradable pollution permits. They are so easy to sell to someone else that they can be a huge drain on government revenue.
The trick to a tradable pollution permit is that it should be an easy sell to someone who is not going to have to pay the company to make the permit available. Companies which fail to make a tradable permit available are making a loss on the permit. The company which failed to make a tradable permit available is making a lot of money from the permit. But the company that succeeded at making a tradable permit available had to pay a tax on it.
In this case, the company which succeeded had to pay a tax on the permit. The trouble is that the tax is not easy to collect. It’s not like that in the U.S. because our system is a patchwork of different state and local tax codes. In the U.S., we have a special tax code which allows companies to deduct the tax from their income. This allows people who do not have to pay the tax to get a tax break.