What does cap and trade mean?

cap and trade meaning in Law Dictionary

Emissions trading (also referred to as limit and trade) is a market-based method familiar with get a grip on pollution by giving financial incentives for achieving reductions within the emissions of toxins.

cap and trade meaning in Business Dictionary

system enacted to advertise environment-friendly guidelines by mandating emissions. The emissions allowance is strictly controlled and should never surpass the predetermined limit quantity. Emissions licenses are given to companies, and are capped by government. Companies are in a position to transfer these licenses with other capped businesses if the company determines that it will not require all licenses offered.