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emission allowances and other environmental policies emission allowances are just one tool in a broader set of environmental policies that are designed to reduce greenhouse gas emissions in this video well explore how emission allowances interact with other environmental policies one policy that works in conjunction with emission allowances is a carbon tax a carbon tax puts a price on each unit of greenhouse gas emitted which creates an incentive for companies to reduce emissions in order to avoid paying the tax renewable energy policies also interact with emission allowances these policies aim to increase the share of renewable energy in the electricity sector which can reduce emissions from power generation and ultimately reduce the need for emission allowances Energy Efficiency standards are another policy that interacts with emission allowances by mandating that products meet certain efficiency standards these policies reduce the energy consumption and missions associated with tho