Emissions trading
market-based approach to controlling pollution by providing economic incentives for reducing the emissions of pollutants
Emissions trading is a market-oriented approach to controlling pollution by providing economic incentives for reducing the emissions of pollutants. The concept is also known as cap and trade (CAT) or emissions trading scheme (ETS). One prominent example is carbon emission trading for CO2 and other greenhouse gases which is a tool for climate change mitigation. Other schemes include sulfur dioxide and other pollutants.
In an emissions trading scheme, a central authority or governmental body allocates or sells a limited number (a "cap") of permits that allow a discharge of a specific quantity of a specific pollutant over a set time period. Polluters are required to hold permits in amount equal to their emissions. Polluters that want to increase their emissions must buy permits from others willing to sell them.
Emissions trading is a type of flexible environmental regulation that allows organizations and markets to decide how best to meet policy targets. This is in contrast to command-and-control environmental regulations such as best available technology (BAT) standards and government subsidies.
Introduction
Pollution is a prime example of a market externality.
Begin with the source’s own compact description: “Emissions trading” is market-based approach to controlling pollution by providing economic incentives for reducing the emissions of pollutants. The dossier treats that line as a proposition to test through Emissions, trading and market-based, not as a finished interpretation.
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Named sources, stable identifiers and responsible institutions provide the strongest route from overview to verifiable evidence. The source revision retrieved here is dated Aug 11, 2026. The linked authority identifier is Q8348417. None of the 0 selected statements returned an explicit reference.
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This entry incorporates text from “Emissions trading” on English Wikipedia. Contributors are listed in the page history. Text is available under the Creative Commons Attribution-ShareAlike 4.0 License. Selected authority identifiers and statements are retrieved from Wikidata under CC0; their references and qualifiers remain part of the verification path.