EU ETS

The European Union Emissions Trading System (EU ETS) is a market-based approach to reducing greenhouse gas emissions. It sets a cap on the total emissions from certain industries and grants companies allowances—each permitting a specific amount of emissions. Companies can trade these allowances, buying more if they need and selling excess if they can cut emissions. Over time, the cap decreases, encouraging industries to innovate and emit less. This system incentivizes cost-effective emission reductions and supports the EU's climate goals by making pollution more expensive and promoting cleaner practices.