European Union ETS

The European Union Emissions Trading System (EU ETS) is a market-based approach to reducing greenhouse gas emissions. It sets a cap on total emissions from industries like power plants and manufacturing. Companies receive or buy emission allowances, which they can trade with each other. If a company emits less than its allowance, it can sell the surplus; if it exceeds, it must buy extra allowances. This creates financial incentives to cut emissions efficiently. The EU ETS aims to encourage cleaner practices, promote innovation, and help the EU meet its climate goals.