Cap-and-Trade Program

A Cap-and-Trade Program is an environmental policy designed to reduce pollution, particularly greenhouse gases. The government sets a limit (cap) on total emissions allowed from industries. Companies receive or buy emission permits allowing them to emit a certain amount. If a company pollutes less, it can sell its extra permits to others that exceed their limits (trade). This creates a financial incentive for businesses to reduce their emissions, as cleaner companies can profit from selling permits, while those that pollute more will face higher costs. The overall aim is to lower pollution effectively and efficiently over time.