emissions trading

Emissions trading, also known as cap and trade, is a market-based approach to controlling pollution. It involves setting a limit (or cap) on the total amount of emissions a group of organizations or industries can release. These organizations can trade or buy allowances, which represent a specific amount of emissions, amongst themselves. This mechanism creates a financial incentive for reducing emissions, as those who can reduce emissions more easily can sell their surplus allowances to others who find it more costly to do so. Overall, it aims to reduce pollution levels efficiently by encouraging emission reductions where they can be achieved at a lower cost.

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