Each factory tower emits CO2 at a fixed baseline rate. A regulator issues permits equal to a shrinking cap (the translucent ceiling). Every firm compares its own marginal abatement cost to the market permit price: if abating is cheaper than buying permits, it cuts emissions; otherwise it keeps polluting and pays the price. The simulator solves for the price that clears the market — where total emissions from non-abating firms plus abated leftovers exactly equals the cap.
clearing condition: Σ emissions_i(price) = Cap(t)
firm i abates ⇔ MAC_i < price
Cap(t) = Cap(0) · (1 − r)^years
- Cap tightening — annual % cut to the allowance ceiling; a tighter cap pushes the price up.
- Number of firms — more emitters sharing a fixed cap raises competition for permits.
- Abatement-cost spread — how varied firms' cleanup costs are; wider spread means cheap abaters cut first, smoothing the price curve.
- Pause — freeze the market clock to inspect a snapshot.
Real cap-and-trade programs like the EU ETS and California's system use this exact price-discovery mechanism to cut emissions at the lowest total cost to the economy.