So, let me get this straight. You are going to get sick. You must pick one of two diseases. You can either get cancer or a common cold. You would pick cancer because bad is bad? (I don't believe you! Given that choice, I'd much prefer a cold!)
Bad is Bad? That is total nonsense, there are always different levels of good and bad. To keep one thing that is very bad because you don't want to replace it with something less bad is very foolish to say the least.
We know that farmers must use chemicals because their customers (us) demand it. And you don't want to ever replace dangerous chemicals that were developed in the past with newer, less dangerous chemicals? If I was your teacher and you were taking a logic class from me, you would be getting an F- for that type of reasoning! 
We know companies won't spend huge amounts of money to improve their pollution output if they don't have too (we both agree on that). Companies don't make more money by making more pollution like you said. True, it may cost them more to reduce what they currently produce because they have to add expensive equipment, but if they produce more pollution right now, their profits don't go up. They aren't going to remove expensive equipment that they already have. Doing that would cost them money also! We also know that by trading these "pollution" credits, it allows some companies to improve total polution output when they wouldn't or couldn't afford to do so otherwise. What's wrong with that? You would prefer no change because it is simply too expensive for companies to do?
Did you ever hear about a study that was done here in California where the state could give every person who drives a "mass" polluting car, a free brand new Cadillac. They could set up smog detectors on the side of the highway that would actually detect how much smog a car puts out while it is driving down the freeway. (this smog detecting technology already exists) It would cost less than 1/10 what is spent today by smog checking every car in the state every 2 years and forcing people to fix those that don't pass? On top of that, it would reduce smog by more than the current system of systematic checking. Consider that I own 2 cars, I have a brother that owns 2, another brother that owns 4, and my parents own 2, and none of us have ever failed a smog check. In fact, my 15 year old Honda's pollution levels are 2% or less in every category that is checked and new cars are better! That means that I have wasted about 1/2 a days work, 7 times, and paid about $35 each time for no change in pollution what so ever! Now multiply that cost to society by all the cars in California! Unbelievable waste!
The pollution trade concept is the same. Spend less for more of an improvment in polution by using polution as a commodity. A large, fairly clean company could buy a small dirty company and shut it down, or fix it up and keep both companies, or at least one, working. Under the current plan, the large company can't change anything because it is large and changing that much equipment is too expensive for it to stay in business. The small dirty company can't afford change either because while that small change isn't all that expensive, it is a small company and it still doesn't have the money. But this way, the air is cleaner for everyone instead of things staying the same.
Probably a better way for you to look at it is: An improvement is an improvement, regardless, period. Keeping things the same is no improvement at all and never will be! 
Rodney