Carbon trading is a market-based approach to controlling pollution by providing economic incentives for reducing emissions of carbon dioxide and other greenhouse gases. Companies or countries that reduce their emissions below a certain limit can sell their excess allowances to others that are struggling to meet their targets. This creates a financial motivation to lower emissions and invest in cleaner technologies. The system operates under various frameworks, such as the European Union Emissions Trading System (EU ETS) and the California Cap-and-Trade Program. By setting a cap on total emissions and allowing trading, carbon trading aims to reduce overall greenhouse gas emissions in a cost-effective manner while promoting sustainable practices.