Cap and Trade

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Cap and Trade[edit]

A market-based approach aimed at constraining the aggregate emissions of pollutant by creating a number of tradable emissions allowances. These allowances are then allocated among firms and businesses, with the possibility for companies that keep their emissions below the level allotted, to sell their surplus to the ones which require a greater level of pollution in their production process. It is argued that this system of tradable emissions allowance represents an economic incentive for companies to reduce their negative environmental impact, as well as to develop more sustainable production technologies.

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