Emissions Allowance

An emissions allowance is a permits system that sets a cap on the total amount of greenhouse gases, like carbon dioxide, that companies can emit. Each allowance grants the holder the right to emit a certain amount. Companies can buy, sell, or trade these allowances, incentivizing them to reduce emissions. If a company produces less than its allowance, it can sell the extra credits; if it needs more, it can purchase additional allowances. This market-based approach encourages businesses to lower their emissions cost-effectively, helping to reduce overall environmental impact while allowing flexibility for different approaches to pollution control.