What role do emissions trading systems play in air quality management?

Emissions trading systems, also known as cap-and-trade systems, play a crucial role in air quality management by allowing companies to buy and sell allowances for emissions. This market-based approach provides an economic incentive for companies to reduce their emissions.

In essence, a regulatory authority sets a cap on the total level of greenhouse gases that can be emitted by all participating entities. Each company is allocated a certain number of allowances that represent the right to emit a specific amount of pollutants. If a company reduces its emissions below its allowance, it can sell its extra allowances to other companies that may exceed their limits. This flexibility encourages innovation and cost-effective solutions for reducing emissions, leading to overall improvements in air quality.

The system fosters a financial mechanism that promotes reductions where they are cheapest and most efficient to achieve, supporting broader environmental goals without imposing rigid mandates on individual companies.