Pollution credits emerged from the federal Clean Air Act of 1990 (CAA) as a way for businesses to deal with the regulations that attempt to lower air pollution. The Environmental Protection Agency (EPA) and individual states have created a "cap and trade" system (in practice since 1995) allowing utilities and manufacturers allowances to emit a certain amount of specific pollutants. This system offers companies some flexibility in their compliance while helping to maintain the standards required for cleaner air.

A company can earn pollution credits by voluntarily reducing polluting emissions below limits dictated by the EPA. Earned credits can then be sold to another company that has trouble keeping its emissions within permissible limits, or saved for future use. According to Dean S. Sommer writing for The Albany (New York) Business Review in March 1999, "The 'cap' portion of the system refers to the specific amount of emissions that...