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  1. CAP AND TRADE
    A government sets a ceiling, or cap, on the total amount of carbon emissions it will allow in a certain time period. Companies who want to increase their emissions must buy permits from those companies who are polluting less.

    CARBON TAX
    A fee imposed by the government on each tonne of CO2 emitted by companies. Simpler to implement than a cap and trade system, but less popular with companies.