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Carbon trading is a way of putting a price on carbon dioxide emissions which encourages efficient use of resources in minimizing the emissions, and thus potential gaining maximum impact in reduction of carbon for every dollar spent. It requires the creation of a market for trading carbon permits.
The cap in "cap and trade" is the maximum amount of carbon that can be traded.
Criticisms fall into two main categories:
- Fundamental criticism of a market-based approach. This may be for perceptions of equity, or due to a belief that "markets do not work."
- Criticism of particular carbon trading proposals. In many proposals, the biggest polluters are "compensated" with very large direct and indirect subsidies, which is widely seen as unfair.
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