Cap and Trade Definition

June 16, 2010 by Post Team 

Cap and Trade Definition:Cap and trade is hot topic today. But what is the definition of Cap and Trade? Why do many people look for Cap and Trade definition? According cap and trade is the definition of a method for regulating and ultimately reduce the amount of pollution emitted into the atmosphere. It is seen as a more democratic solution to the regulation of pollution of a carbon tax because it creates a product of the right to emit carbon and allow the goods to be traded on the open market.

The basic concept consists of two parts, the governing body and the regulated firms or units that emit pollution. The government sets a limit to the contamination, which limits the amount of carbon dioxide and harmful production companies and other groups are allowed to release. The government issues loans that allow companies to pollute a certain amount, provided that the aggregate equals pollution unless the ceiling.

Because some companies can reduce emissions, cheaper than other companies can engage in trade of any additional permission. Companies that can reduce pollution more efficiently sell permits to companies that can not easily afford to reduce pollution. Companies that sell the permits are rewarded, while allowing the purchase to pay for their negative effects. Applied to climate change, this system theoretically would reduce carbon emissions at the lowest total cost.

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