Cap and trade: A program set up by the California Air Resources Board to limit emissions on polluting industry. The market-based approach requires business to buy permits, also known as allowances, for each ton of greenhouse gas they emit.

Greenhouse gases: Planet-warming emissions include carbon dioxide, methane, nitrous oxide and ozone. World leaders have pledged to cap global warming at 2 degrees Celsius as compared to preindustrial levels. The plant’s mean temperature has already risen roughly 1 degree since the early 1800s.

Allowances: Business buy allowances for each ton of greenhouse gas they emit, under California’s cap-and-trade program. The number of allowances reduce over time, thus capping emissions. Businesses and save allowances and sell them to other regulated companies.

Carbon-offset credits: Business can qualify to sell carbon-offset credits by engaging in a number of state-approved practices, from timber companies embracing progressive logging techniques to dairy farmers trapping the methane from manure. Under the cap-and-trade program, regulated businesses can purchase offsets instead of allowances for up to 8 percent of their carbon footprint.


Carbon registry: Carbon-offset credits are bought and sold through online marketplaces known as carbon registries. The most prominent registries include the American Carbon Registry, Verified Carbon Standard and Climate Action Reserve.