Emission Trading Schemes

An Emission Trading Scheme (ETS) is a market-based approach to controlling pollution by setting a cap on total greenhouse gas emissions. Governments issue a limited number of allowances, each permitting a company to emit a certain amount. Companies can buy or sell these allowances, incentivizing those that can reduce emissions cheaply to do so and sell their extra allowances. This creates a financial motivation to lower emissions efficiently across industries, aiming to reduce overall pollution while allowing flexibility in how companies meet their targets.