Map Source: ICAP
The Emissions Trading System (ETS) is a market-based tool that can be used to reduce greenhouse gas (GHG) emissions. It operates on the principle of “cap and trade”. The government sets a limit (cap) on the total emissions of one or more economic sectors. For each ton of emissions, the companies in these sectors need to hold a permit, or an allowance. They can receive or purchase permits, and they can trade with other companies. This is the “trade” part of “cap and trade”.
Figure Source: ICAP
