EU Emissions Trading System

The EU Emissions Trading System (EU ETS) is a market-based approach to reducing greenhouse gases. It caps the total emissions allowed from industries like power plants and factories and allocates or sells allowances for each unit of emissions. Companies can buy or sell these allowances, incentivizing them to cut emissions; if they reduce emissions below their allowance, they can sell the excess. This creates a financial motivation to reduce pollution, encouraging cleaner technologies and practices across the EU, aiming to meet climate goals cost-effectively while maintaining industrial competitiveness.