In emissions trading systems, giving companies free pollution permits instead of making them pay for them can make firms less likely to invest in cleaner technologies. This happens because when permits are free, firms can make more money from using polluting technologies. This difference in profits leads to less investment in cleaner options, especially when similar products compete with each other. This problem is seen in programs like the California Cap and Trade Program and the European Union Emissions Trading System. While free permits might make more people like the idea of carbon pricing, they can make it harder to reduce pollution in the long run by discouraging companies from choosing cleaner options.