For example, imposing the same obligations to reduce emissions on all firms is equivalent to a poor allocation of resources if this reduction is far costlier for one firm than for another. It follows that the rigidity of the rules is sometimes tempered by market mechanisms, for instance through the concept of freely tradable ”emission permits”.
The State decides the total amount of emissions tolerated and provides for an initial distribution of the relative quotas; private firms can then trade them against payment. Those who are able to reduce emissions at low cost will take advantage of the chance to sell their shares to firms for which a reduction is more expensive.