Cap-and-Trade Regulation

Cap-and-trade regulation is a system designed to reduce pollution by setting a limit (cap) on total emissions from certain industries. Authorities issue allowances, each permitting a specific amount of pollution, which companies can buy, sell, or trade. If a company reduces its emissions below its allowance, it can sell the excess allowances to others. Over time, the cap decreases, lowering overall pollution. This market-based approach incentivizes companies to innovate and cut emissions efficiently, balancing environmental goals with economic considerations.