The basis of the carbon trading mechanism. When an authority sets a limit or cap on something ( i.e. carbon dioxide (CO2) emissions) and allows those who exceed the limit to buy "credits" from those who have credits to spare. Exchange Handbook Glossary
* * *
cap and trade UK US noun [U] ENVIRONMENT, SOCIAL RESPONSIBILITY
► a system that puts a limit on the amount of pollution companies can produce. Companies can buy and sell rights to put harmful gases into the air, meaning a company that reduces its pollution is financially rewarded: »
Cap and trade has been successful in reducing acid rain in the U.S. by more than 30%.
»cap and trade program/scheme/system
Financial and business terms. 2012.