Carbon Trading

EconomicsHelp

Carbon Trading is a scheme where firms (or countries) buy and sell carbon permits as part of a programme to reduce carbon emissions. Usually firms are given a certain quote to pollute a certain amount. If they wish to pollute more than their allowance then they have to buy more permits. If they pollute less than their quota they can sell their spare permits on the market. Thus there is an incentive to reduce pollution and find the most efficient way of dealing with pollution. Over time governments can reduce pollution quotas to encourage greater efficiency

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