a policy framework in which a government caps the amount of greenhouse gases that can be emitted in the country or region during a given period. Emissions permits, which allow companies to emit a specific amount of greenhouse gases, are issued or sold to companies, up to the national or regional cap. These permits can be traded among companies—sold by companies that emit less than their targets and bought by those that emit more—creating a financial incentive to lower emissions and providing flexibility for companies that cannot or do not wish to do so.