buyer pays a charge for polluting, while the seller gains a reward for having reduced emissions. Emissions Trading results in the incorporation of economic costs into the costs of production which incentivizes corporations to consider investment returns and capital expenditure decisions with a model that includes the price of carbon and greenhouse gases (GHG). In many schemes, organizations which do not pollute (and therefore have no obligations) may also trade permits and financial derivatives of permits. In some schemes, participants can bank allowances to use in future periods. In some schemes, a proportion of all traded permits must be retired periodically, causing a net reduction in emissions over time. Thus, environmental groups may buy and retire permits, driving up the price of the remaining permits according to the law of demand. In most schemes, permit owners can donate permits to a nonprofit entity and receive a tax deductions. Usually, the government lowers the overall limit over time, with an aim towards a national emissions reduction target. According to the Environmental Defense Fund, cap-and-trade is the most environmentally and economically sensible approach to controlling greenhouse gas emissions, the primary cause of global warming, because it sets a limit on emissions, and the trading encourages companies to innovate in order to emit less. There are active trading programs in several air pollutants. An earlier application was the US national market to reduce acid rain. The United States now has several regional markets in nitrogen oxides. For GHG, which cause climate change, carbon emission trade has been introduced in the European Union, China, the UK, Australia, New Zealand, some US states including California and a collection of Northeastern states, and other countries. History The efficiency of what later was to be called the "cap-and-trade" approach to air pollution abatement was first demonstrated in a series of micro-economic computer simulation studies between 1967 and 1970 for the National Air Pollution Control Administration (predecessor to the United States Environmental Protection Agency's Office of Air and Radiation) by Ellison Burton and William Sanjour. These studies used mathematical models of several cities and their emission sources in order to compare the cost and effectiveness of various control strategies. Each abatement strategy was compared with the "least-cost solution" produced by a computer optimization program to identify the least-costly combination of source reductions in order to achieve a given abatement goal. In each case it was found that the