tradable-allowance scheme

A tradable-allowance scheme, also known as cap-and-trade, is an environmental law strategy that limits total emissions but allows companies to buy and sell pollution rights. This system sets a cap on the amount of a pollutant, like carbon dioxide or sulfur dioxide, that companies can emit. Each company receives a certain number of allowances, and those who emit less can sell their unused allowances to companies that exceed their limits.1234

This approach creates a market for pollution, incentivizing companies to find cost-effective ways to reduce emissions. It has been used successfully to control acid rain and is being applied to manage greenhouse gas emissions. The goal is to achieve environmental targets more efficiently than traditional regulations.32