Emission Trading System

An Emission Trading System (ETS) is a market-based approach to reduce pollution, especially greenhouse gases. Governments set a cap on total emissions allowed and distribute or auction emission permits to companies. Companies can buy or sell these permits depending on their needs—those reducing emissions can sell extra permits, while higher emitters buy permits to cover their emissions. This creates an economic incentive to lower pollution efficiently, encouraging innovation and cost-effective environmental protection. Overall, ETS aims to achieve environmental goals while letting market forces determine the most effective reduction strategies.