Final answer:
Corrective taxes and pollution permits are both market-based mechanisms for pollution control, incentivizing firms to reduce pollution through economic means.
Step-by-step explanation:
Corrective taxes and pollution permits share the commonality of being market-based mechanisms for pollution control. Both approaches create economic incentives to reduce pollution and allow some flexibility to the firms in terms of how they will reduce pollution. These are not to be confused with command-and-control regulations, which are more rigid and specify exact limits or methods for reducing pollution.
Tradable permits, or marketable permits, set up a market where firms can buy and sell the right to pollute, incentivizing firms to reduce emissions to sell their excess permits. Corrective taxes, or pollution charges, impose a tax on the amount of pollution a firm emits, providing a financial incentive to reduce emissions. Both tools aim to internalize the external costs of pollution—costs not reflected in the market price of goods—and they can be used separately or in combination to address environmental challenges.