Cap and trade
A market-based approach to controlling pollution by providing economic incentives for achieving emissions reductions. The overall volume of greenhouse gases that can be emitted by the sectors covered by the EU Emissions Trading System (EU ETS) is limited by a ‘cap’ on the number of emission allowances. Within the cap, companies receive or buy emission allowances, which they can trade as needed. The cap decreases every year, ensuring that total emissions fall.
