The EPA is considering new regulations to reduce mercury emissions from power plants. Rank the following policies in order of how well they encourage electricity producers to innovate and design cheaper ways to reduce mercury. [Assume technology exists to measure mercury emissions, and all three policies yield the same emission reduction given current technology.]
A rule that electricity plants must reduce mercury emissions by using a particular technology (activated carbon injection).
A tradable permit system where a fixed number of mercury emission permits are distributed for free and firms can trade them.
A rule that electricity producers must reduce mercury emissions by a given percentage.