Trading schemes cause changes in the relative costs or prices faced by economic agents by regulating the trade of permits or certificates, which may cause a direct financial benefit (e.g. by providing the options of selling them) or set a price on the behaviour of the regulated agents (e.g. by providing the options of purchasing them). They include:
- Cap-and-trade emissions trading systems (ETS): sets a limit on GHG emissions by specified sources, distributes tradable allowances approximately equal to the limit, and requires regulated emitters to submit allowances equal to their verified emissions
- Baseline-and-credit ETS: GHG emitters that reduce their emissions beyond a baseline level can earn credits that can then be sold to other agents that need them to meet their regulatory obligations. There is no fixed limit on GHG emissions.
- Any other tradeable standard, including for example, tradeable GHG and air emissions standards, tradeable renewable electricity generation certificates, or tradeable fuel economy standards.
- Offset credits: voluntary GHG emission reductions for which tradable credits are issued by a government body and can be used for compliance with a legal obligation (imposed e.g. by an ETS).
They exclude voluntary emission trading systems (e.g. pilot systems in which participation is not mandatory), which are classified under Voluntary approaches; offset systems not mandated or regulated by the government.