Emissions Trading System (ETS)

An Emissions Trading System (ETS) is a market-based approach used to reduce greenhouse gas emissions. Governments set a limit on total emissions and allocate or sell a certain number of permits to companies, allowing them to emit a specific amount. Companies that reduce their emissions can sell their extra permits to others that exceed their limits. This creates a financial incentive to lower emissions, encouraging innovation and cost-effective solutions. Overall, an ETS aims to combat climate change while allowing flexibility for businesses to manage their environmental impact efficiently.