ABSTRACT
Emissions trading (or cap an d trade) see ks to con tro l polluti on an d the emission of gree nhouse gases by providing econom ic incentives for ach ieving red uctions in such emissions .
The essence of any cap and trad e scheme is that a national government or other authority sets a limit or cap on the amount of a pollutant tha t can be emitted by a pa rticula r industry or commercial sector (or, prospectively, by ind ividuals if any of the put ative pe rsona l carbon allowance schemes come to fruition). Companies or other groups that em it the pollutant are given credits or allowances w hich rep resent the right to emit a specific amoun t. The tota l amount of credits cannot exceed the cap, limiting tota l emissions to that level. Companies tha t pollute beyond their allowances must buy cred its from those who pollute less than their allowa nces or face heav y penalties.
