Emission Trading System (ETS)

An Emission Trading System (ETS) is a market-based approach aimed at reducing greenhouse gas emissions. Governments set a cap on total emissions and issue permits, allowing companies to emit a certain amount of pollutants. Companies that reduce their emissions can sell their extra permits to those that exceed their limits. This creates a financial incentive to lower emissions, as companies can profit from being more efficient. By putting a price on carbon, an ETS encourages innovation and investment in cleaner technologies, helping to combat climate change more effectively.