Carbon trading policies are significant in climate action as they provide an economic incentive for reducing greenhouse gas emissions. By capping emissions and allowing the trading of carbon credits, these policies aim to create a market for pollution control, encouraging businesses to adopt cleaner technologies and practices. This system motivates entities to innovate and lower their carbon footprint while generating financial benefits from selling surplus credits. Effective carbon trading can lead to substantial reductions in overall emissions and is an important tool in the fight against climate change.