# Emissions Trading System (ETS) **What is the Emissions Trading System (ETS)?** Emission trading systems (ETS) or cap-and-trade systems, cap GHG emissions to achieve the climate goals of a particular jurisdiction. Carbon allowances equal to the emissions cap are then freely allocated or auctioned to emitting entities who may then trade these allowances between them with a price determined by supply and demand. Allowance trading is a key benefit of ETS as it incentivizes least-cost abatement, as firms with a low abatement cost will abate and sell their allowances to firms with a higher abatement cost. An ETS also often allows firms to “bank” allowances and hold them for use in future compliance years. Emitters with an insufficient number of allowances required for their industry at the end of the reporting period incur penalties. --- # Agent Instructions: Querying This Documentation If you need additional information that is not directly available in this page, you can query the documentation dynamically by asking a question. Perform an HTTP GET request on the current page URL with the `ask` query parameter: ``` GET https://wp.newgreendealcorp.com/carbon-credit-market/emissions-trading-system-ets.md?ask= ``` The question should be specific, self-contained, and written in natural language. The response will contain a direct answer to the question and relevant excerpts and sources from the documentation. Use this mechanism when the answer is not explicitly present in the current page, you need clarification or additional context, or you want to retrieve related documentation sections.