Cap and trade is a market-based approach to reducing emissions by setting an overall limit (cap) on total emissions while allowing entities to buy and sell emission allowances (trade). The government sets the cap, which decreases over time, and distributes or auctions allowances. Companies that reduce emissions below their allowances can sell surplus permits to those finding reductions more difficult. This creates economic incentives for emission reductions where they are cheapest. Quebec operates a cap and trade system linked with California. Cap and trade is an alternative to carbon taxes—both put a price on emissions but through different mechanisms. Ontario briefly had cap and trade before cancelling it.