A market-based system that is meant to regulate greenhouse gas emissions responsible for global warming. The carbon market trades emissions under cap-and-trade schemes or with credits that pay for or offset GHG reductions. The scheme’s governing body begins by setting a cap on allowable emissions. It then auctions off emissions allowances that total the cap. Member firms that do not have enough allowances to cover their emissions must either make reductions or buy another firm’s spare credits. Members with extra allowances can sell them or bank them for future use. Cap-and-trade schemes can be either mandatory or voluntary.