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emissions trading

Emissions trading exists in countries where there is an overall top limit set on the emissions that industry can produce. Each business has a permit allowing it to produce a certain quantity of CO2 emissions; if it needs to exceed that limit, it must buy additional 'credits' from another business which has produced less than its permitted emissions. In theory, this mechanism means emissions reductions are made with the minimal adverse effect on the wider economy because those industries that find it hardest to cut emissions are helped by those where the cheapest reductions can be made.

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