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Cap and Trade


An emissions trading system, which involves the buying and selling of emission allowances, where total emissions are limited or "capped". The Kyoto Protocol is a cap and trade system in the sense that emissions from Annex-B countries are capped and excess permits can be traded. The Chicago Climate Exchange (CCX) is also a cap and trade system where organizations sign up to a legally binding reductions policy.


"Glossary", Eco securities Limited. "Challenges for a business case for high-biodiversity REDD Projects and Schemes."- A Report for the Secretariat of the CBD, February 2009, Version1.2, "Definitions and Jargon" Reducing Emissions from Deforestation and Degradation (REDD): A Casebook of On-the- Ground Experience. 2010. The Nature Conservancy, Conservation International and Wildlife Conservation Society. Arlington, Virginia.

Alternative definition

Cap and trade emissions trading systems allow environmental damage to be reflected in market prices. By capping emissions, they guarantee that the desired level of emission reduction is achieved; and by allowing trading, they give business the flexibility to find the cheapest solutions, while rewarding investment in low-carbon technologies and innovation.

Alternative source

United Nations, General Assembly, Sustainable development: implementation of Agenda 21, the Programme for the Further Implementation of Agenda 21 and the outcomes of the World Summit on Sustainable Development (…).