emission trading schemes

Emission trading schemes, also known as cap-and-trade systems, are market-based approaches used to reduce greenhouse gas emissions. They establish a limit or "cap" on the total amount of emissions allowed from participating industries or entities. These schemes allow participants to trade emission allowances, enabling those who can reduce emissions at a lower cost to sell their excess allowances to those who face higher costs. This mechanism incentivizes emissions reductions while providing flexibility and cost-efficiency in achieving environmental targets.

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