The Concept of Emissions Trading
Emissions trading harks back to an old concept in environmental protection. The use of natural resources - for the provision of goods as well as the release of waste products – should be reflected in monetary terms. From a climate protection perspective, the emission of greenhouse gases which are the cause of global temperature rise (greenhouse effect), is a use of natural resources as defined above. In emission trading, emitters of climate-damaging carbon dioxide (CO2) must be in possession of the relevant allowances. If an emitter does not possess a sufficient number of allowances, they can either reduce their emissions by using climate-friendly technology or acquire additional allowances. The total number of available allowances, however, remains limited. Thus, the additional purchase of allowances is only possible if a reduction of CO2 output has been achieved elsewhere..
The idea is very simple. On a global scale, it does not matter where greenhouse gas emissions are generated, as long as they are collectively reduced.