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An Emissions Trading System (ETS), also known as a cap-and-trade system, is designed to control and reduce greenhouse gas (GHG) emissions by setting a total emissions cap and allowing participants to trade allowances. How it works: A government or regulator sets a cap on total emissions. Companies receive or buy carbon allowances (permits to emit a certain amount of CO#). Companies can trade allowances-if they emit less, they can sell excess permits; if they emit more, they must buy additional permits. Key examples: EU Emissions Trading System (EU ETS) (largest globally) California Cap-and-Trade Program China's National Carbon Market (launched in 2021) Why not A or B? A is incorrect because an ETS does not directly set a price on carbon-it allows the market to determine the price based on supply and demand. B is incorrect because an ETS does not involve direct investment in renewable energy (that would be carbon offset programs). References: European Commission: EU Emissions Trading System (ETS) World Bank: State and Trends of Carbon Pricing 2023