These options include installing more advanced pollution control technology, switching to cleaner fuels, improving energy efficiency, and increasing renewable energy use. Sources that decrease their emissions by implementing such measures create emission reductions . Emission reductions from energy efficiency and renewable energy produce health and environmental benefits by reducing sulfur dioxide, carbon dioxide, nitrogen oxides, lead, mercury, and particulate matter emissions. Emission reductions are decreases in pollutant emissions that result from actions like installing more advanced pollution control technology, switching to cleaner fuels, improving energy efficiency, and increasing renewable energy use. Emission trading occurs when a source of air pollution reduces its emissions and then transfers ownership of the emission reduction to another party.
Emissions trading involves the transfer in ownership of emission reductions.
Emission allowances are typically given by regulators to large sources of pollution, and allow those sources to release a prescribed amount of a pollutant. Surplus allowances can be sold, traded, or banked for future use. Sources of air pollution that reduce their emissions may receive credit for their reductions. Credits for emission reductions provide an incentive to find the most cost-effective way to reduce emissions, since once an emission reduction credit is created, it can be sold on the open market. The amount of the credit corresponds to the amount and type of emission reduction.