In both case firms could be pushed, to maximise their profits to pay the fines or to buy marketable permits from less polluting companies (depending from the grade of fine); the same is also for the subsidizing. Performance based regulations and input regulations are introduced like one of the best way to control the pollution created from the market...
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Performance based regulation can make some injustice in the market, like example taken from the scrubber regulation in the American coal industry, where the imposition of limits on pollution led some producer from western U.S.A. not to use scrubber thanks to their different geological characteristic of resources, with bad competition to east producer...
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