Cap-and-trade is a policy system that limits total emissions by setting a cap and issuing allowances for permitted emissions. Participants can buy or sell these allowances, so organizations that reduce emissions may sell unused permits while others can purchase what they need. The cap can be reduced over time to encourage lower emissions.
In cyber security, the term is not a technical security mechanism; it describes a regulated market model. Its operation depends on reliable records, monitoring, and enforcement: authorities must track allowances and emissions, verify compliance, and deter fraud or unauthorized changes. In a carbon market such as the EU ETS, these controls help maintain confidence that reported emissions and traded allowances reflect the rules. Weak oversight or inaccurate records can undermine the market’s credibility and its intended incentives.