What is cap-and-trade?
A cap is set on total greenhouse gas emissions within a jurisdiction, and the cap is slowly lowered over time. Businesses must purchase allowances to cover their emissions for a compliance period, but the government only makes available enough allowances to fit within the overall cap. The allowances can be purchased from the government through auctions, or bought from other businesses that are holding more allowances than they need. As the cap is lowered and fewer allowances are on offer, the price of each allowance goes up.http://ottawacitizen.com/news/local-news/a-cap-and-trade-explainer