A Pollution Solution

Download A Pollution Solution Guide

Lesson Overview

In this activity, students acting as owners of companies emitting proscribed substances engage in a market for tradable pollution credits. So-called “cap-and-trade” programs have been used successfully to meet pollution standards while incorporating incentives to find least-cost solutions.

Video Demonstration

National Economic Content Standards addressed:

Standard 1: Productive resources are limited. Therefore, people cannot have all the goods and services they want; as a result, they must choose some things and give up others.

Standard 2: Effective decision making requires comparing the additional costs of alternatives with the additional benefits. Most choices involve doing a little more or a little less of something; few choices are all-or-nothing decisions.

Standard 3: Different methods can be used to allocate goods and services. People, acting individually or collectively through government, must choose which methods to use to allocate different kinds of goods and services.

Standard 4: People respond predictably to positive and negative incentives.

Standard 5: Voluntary exchange occurs only when all participating parties expect to gain. This is true for trade among individuals or organizations within a nation, and among individuals or organizations in different nations.

Standard 7: Markets exist when buyers and sellers interact. This interaction determines market prices and thereby allocates scarce goods and services.

 Standard 10: Institutions evolve in market economies to help individuals and groups accomplish their goals. Banks, labor unions, corporations, legal systems, and not-for-profit organizations are examples of important institutions. A different kind of institution, clearly defined and enforced property rights, is essential to a market economy.


(See download link, above, for handouts, visuals, and teacher guide.)

 Role cards A, B, and C:  1 per student, 1/3As, 1/3Bs, 1/3Cs

  • Use a different colored paper for each company’s role cards
  • Transparencies or PowerPoint slides of Visuals
  • $1 bills – 1 per student  (or use candy, bonus points, homework passes, etc, in place of cash)
  • $5 bills – 5
  • Pollution credit slips:  For a class of approximately 30 you’ll need:
    •  24 –  “5,000 ton credit” slips
    • 12 – “1000 ton credit” slips
    • 6 – “500 Ton Credit” slips.
  • Calculators – 1 per company (9 for class of 30)
  • Checks for purchasing certificates –  10-15 (varies)
  • Accounting sheets – one per firm – so 3 As, 3Bs an 3Cs for a class of 30 students.  (copy on the same colored paper as firms’ role cards)


  1. Break participants into groups or “towns” of 9-12 students with a third of the students forming company A, a third of the students forming company B, a third of the students forming company C.  So for a class of 30 you would have 3 towns – each town with a company A, B and C.  Explain that group members are the individual owners of the three companies,
  2. Display “The Problem” visual and read through with students, answering any questions they may have about the situation.
  3. Display “Potential Solutions” visual and review each solution, emphasizing the costs of the alternatives.
  4. Display “The AQCC Plan” visual and explain.
  5. Distribute the pollution credits to the companies at each table.  Place $14 (9 ones, 1 five) in the center of each table.
    • Company A—one 5000 ton credit slip, two 1000 ton credit slips and one 500 ton credit slip
    • Company B—three 5000 ton credit slips
    • Company C—four 5000 ton credit slips, two 1000 ton credit slips and one 500 ton credit slip
  6. Display “The Challenge” visual and review with students.
  7. Distribute role cards, face down, reminding participants that it is their decision how much information to share with the other businesses.
  8. Distribute several blank checks to each group (and let students know they may request more).
  9. Suggest that individual teams discuss their role and answer the questions on their role cards for 3-5 minutes before working to solve the challenge.
  10. Allow teams time to work.
  11. Once teams have completed their negotiations, distribute accounting sheets for each company to fill out.  Collect.
  12. Display the “Better Solutions” visuals and explain.
  13. Award prizes
  14. Debrief

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