Carbon trading systems

Carbon trading systems, also known as cap-and-trade programs, are market-based approaches aimed at reducing greenhouse gas emissions. Governments set a limit (cap) on total emissions allowed and distribute or auction permits (credits) that companies can buy and sell. If a company reduces its emissions below its limit, it can sell its extra permits to others that exceed theirs. This creates a financial incentive for businesses to lower their carbon footprint, promoting innovation and efficiency in reducing pollution. Ultimately, the goal is to decrease overall emissions to combat climate change.