Economics Carbon Trading Questions
Carbon trading contributes to reducing greenhouse gas emissions by creating a market-based system that incentivizes companies and organizations to reduce their carbon emissions. It sets a cap on the total amount of emissions allowed and allocates permits or allowances to participants. Those who emit less than their allocated amount can sell their excess permits to those who exceed their limits. This creates a financial incentive for companies to reduce their emissions, as they can profit from selling their unused permits. As a result, carbon trading encourages the adoption of cleaner technologies and practices, leading to a reduction in greenhouse gas emissions.