Economics Carbon Trading Questions
The role of carbon allowances in carbon trading is to establish a limit on the amount of carbon emissions that a company or entity is allowed to emit. These allowances are typically allocated or auctioned by governments or regulatory bodies. Companies that emit less carbon than their allocated allowances can sell their excess allowances to companies that exceed their allowances, creating a market for carbon trading. This system incentivizes companies to reduce their carbon emissions and promotes the overall goal of reducing greenhouse gas emissions.