The bubble concept seldom involves trading outside a company. However, the concept can be extended from one industrial company to a whole region and several firms. Standards are set, and firms are encouraged to reduce their pollution beyond the required standards to create emission reduction credits. Such credits can be stored for use later (in an emissions bank) when a firm may want to expand, or may be sold to another company that cannot meet the standard. Companies that cannot afford to meet the standards may buy emission credits from other companies and may continue to exceed the standards. The aim is that the standard would be met in the most cost-efficient way possible, because it is in the interests of those firms that can reduce their emissions most cheaply to do so. Each firm can decide whether it is cheaper to reduce its pollution or to buy credits from its neighbours instead.  |
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