Cap and trade is a market-based approach to environmental protection in which a government sets a limit on the amount of a pollutant that can be emitted and then issues a limited number of permits that allow companies to emit the pollutant. Companies can buy and sell these permits, creating a market for pollution. The goal of cap and trade is to reduce pollution by making it more expensive for companies to emit pollutants.
Making money on cap and trade involves buying permits when they are relatively inexpensive and selling them when they become more valuable. This can be done through a variety of financial instruments, such as futures contracts and options. Cap and trade programs have been implemented in a number of countries and have been shown to be effective in reducing pollution.
