What is Cap And Trade?

Legal Definition
Cap-and-trade programs are intended to provide a market-based mechanism for reducing emissions of airborne pollutants, such as greenhouse gases. Under cap-and-trade, a government agency distributes a stack of tradable emissions allowance credits that add up to the emissions target established by the program for that year. Companies can buy and sell those credits, which incentivizes only the most efficient polluters to do so.
Legal Definition
Emissions trading (also known as cap and trade) is a market-based approach used to control pollution by providing economic incentives for achieving reductions in the emissions of pollutants.