Whenever we build things or move things, we produce carbon dioxide. If too much carbon dioxide is produced it poisons the ocean and alters the climate. So we have a strict limit of how much carbon we can produce before bad things happen. This amount is averaged out and distributed to every person (or every business) as an allowance.
Now, if a company needs to produce more carbon dioxide than they’re allowed to, they’re in trouble. So companies that produce less carbon get to sell the companies that produce more carbon the unused carbon allowance. This means that companies that don’t use all of their carbon allowance make money, and companies that use all their carbon allowance but need more can buy it.
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