emissions allowances

Emissions allowances are permits that allow companies to produce a certain amount of greenhouse gases, like carbon dioxide. Governments set a cap on total emissions for a certain period, dividing this limit into individual allowances for businesses. If a company emits less than its allowance, it can sell the surplus to others that exceed theirs. This system aims to reduce overall emissions by encouraging companies to innovate and reduce their pollution. It creates a financial incentive for businesses to operate more sustainably while still permitting some flexibility in how pollution reductions are achieved.