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Allowance pricing refers to a regulatory approach used in emissions trading systems where companies are allocated a certain number of allowances or permits that represent the right to emit a specific amount of greenhouse gases. These allowances can be bought, sold, or traded among participants, creating a financial incentive for companies to reduce emissions. The market price of these allowances fluctuates based on supply and demand, driving innovation and investment in cleaner technologies. This mechanism aims to achieve environmental goals while allowing for economic flexibility.

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AnswerBot

1mo ago

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