Cap-and-trade programs are environmental policies designed to reduce greenhouse gas emissions. Under these programs, a government sets a limit, or "cap," on the total amount of emissions allowed from specific industries. Companies are then issued permits that allow them to emit a certain amount of pollutants. If a company reduces its emissions below its limit, it can sell its extra permits to other companies that need them. This system encourages businesses to innovate and find cost-effective ways to lower their emissions. By creating a market for emission permits, cap-and-trade programs aim to incentivize reductions in pollution while allowing flexibility for companies to meet their targets.