A cap and trade system:

Question

Quizplus · Accepted Answer

A cap and trade system works by setting a limit (or a "cap") on the total amount of greenhouse gas emissions that are allowed in a given period of time. The government then gives out or auctions off a certain number of permits (or "licenses") to emit these gases. Companies can then buy and sell permits among themselves based on their needs. This creates a market incentive to reduce emissions, as companies that emit less can sell their extra permits to those who emit more. Overall, the system aims to reduce emissions while also allowing for economic growth.

A Cap and Trade System