Overview
Carbon markets are a mechanism designed to reduce greenhouse gas emissions by assigning a monetary value to pollution. They operate on the principle of 'cap and trade,' where a regulatory body sets a limit (cap) on total emissions and issues tradable permits (allowances) to polluters. The European Union and China are examples of entities using carbon markets to meet climate targets, such as those outlined in the Paris Agreement. Despite their potential, debates persist regarding their effectiveness, potential for greenwashing, and equitable implementation.