Cap and Trade is an environmental policy designed to reduce greenhouse gas emissions. It sets a limit, or "cap," on the total amount of emissions that can be released by companies. Each company receives or buys permits that allow them to emit a certain amount of pollution. If a company emits less than its allowance, it can sell its extra permits to other companies that need them. This system encourages companies to innovate and reduce their emissions, as they can profit from selling unused permits. Over time, the cap is lowered, leading to overall reductions in pollution and helping to combat climate change.