Apologise, but: How does cap and trade work
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The best climate policy — environmentally and economically — limits emissions and puts a price on them. Cap and trade is one way to do both. The cap on greenhouse gas emissions that drive global warming is a firm limit on pollution.
The cap gets stricter over time. The trade part is a market for companies to buy and sell allowances that let them emit only a certain amount, as supply and demand set the price. Trading gives companies a strong incentive to save money by cutting emissions in the most cost-effective ways. The government sets the cap across a given industry, or ideally the whole economy.
It also decides the penalties for violations.
Carbon dioxide and related pollutants that drive global warming are main targets of such caps. Other pollutants that contribute to smog can also be capped. In carbon dioxide's case, the heat-trapping greenhouse gas mixes into the upper atmosphere and has a global effect. Reducing emissions locally lowers levels around the world. The total amount of the cap is split into allowances, each permitting a company to emit one ton of emissions.
You'd have to drive 2, miles, roughly the distance between New York and Las Vegas, to emit that much carbon dioxide. The government distributes the allowances to the companies, either for free or through an auction.]