Emissions trading or cap-and-trade is a market-based approach used to control pollution by providing economic incentives for achieving reductions in the emissions of pollutants.

A central authority (usually a governmental body) sets a limit or cap on the amount of a pollutant that may be emitted. The limit or cap is allocated or sold to firms in the form of emissions permits which represent the right to emit or discharge a specific volume of the specified pollutant. Firms are required to hold a number of permits (or allowances or carbon credits) equivalent to their emissions. The total number of permits cannot exceed the cap, limiting total emissions to that level. Firms that need to increase their volume of emissions must buy permits from those who require fewer permits.

The transfer of permits is referred to as a trade. In effect, the buyer is paying a charge for polluting, while the seller is being rewarded for having reduced emissions. Thus, in theory, those who can reduce emissions most cheaply will do so, achieving the pollution reduction at the lowest cost to society.

Ronald Ernest "Ron" Paul (born August 20, 1935) is an American politician who has been the U.S. Representative for Texas's 14th congressional district, which includes Galveston, since 1997, and a three-time candidate for President of the United States, as a Libertarian in 1988 and as a Republican in 2008 and currently 2012. He is an outspoken critic of American foreign and monetary policies, including the Military–industrial complex and the Federal Reserve, and is known for his libertarian-leaning views, often differing from his own party on certain issues.

A native of Pittsburgh, Pennsylvania, Paul is a graduate of Gettysburg College and Duke University School of Medicine, where he earned his medical degree. He served as a medical officer in the United States Air Force from 1963 until 1968. He worked as an obstetrician-gynecologist from the 1960s to the 1980s, delivering more than 4,000 babies. He became the first Representative in history to serve concurrently with a child in the Senate when his son Rand Paul was elected to the United States Senate for Kentucky in 2010.