Emissions trading is a market-based approach to controlling pollution by providing economic incentives for reducing emissions of greenhouse gases. It allows companies to buy and sell permits that allow them to emit a certain amount of pollutants. If a company reduces its emissions below its limit, it can sell its excess permits to other companies that need them, creating a financial motivation to lower emissions. This system aims to reduce overall emissions in a cost-effective way. By setting a cap on total emissions and allowing trading, it encourages innovation and investment in cleaner technologies, helping to combat climate change while maintaining economic growth.