A permit allowing the emission of a given quantity of pollution into the atmosphere, rivers, or the sea. The amount of pollution can be restricted by issuing a limited quantity of permits to pollute, and forbidding pollution without a permit. If the permits are tradable, the limited amount of pollution allowed will be undertaken by those firms for which the costs of avoiding it are greatest. This is the efficient outcome. If permits are not tradable, the limited amount of pollution will be less efficiently allocated, and the permits will act as restrictions on entry to the industries concerned. Permits to pollute are an alternative to a tax per unit of pollution, and the two instruments can achieve the same outcomes if permits are tradable and there is no uncertainty. If pollution standards are tightened, allocating tradable permits to pollute to firms in proportion to their past emissions gives them some compensation for the tightened standards. See also Coase theorem; EU Emissions Trading Scheme; pollution control.