Emission Trading

Emission trading, also known as cap-and-trade, is a market-based approach to reducing pollution. Governments set a limit, or cap, on total emissions and issue permits to companies. Companies can buy or sell these permits depending on their needs—if they reduce emissions, they can sell extra permits; if they need to emit more, they buy permits. This creates an economic incentive for companies to cut pollution efficiently, as lower emissions can lead to financial gains. Overall, emission trading aims to lower overall pollution cost-effectively while allowing flexibility for businesses.