Fairly simply. The Chinese government gives every power plant the right to a certain amount of pollution in a given year. Pollute less than that, and you can sell excess pollution rights, or allowances. If you want to pollute more, you have to buy extra allowances. Listed transactions will be for 100,000 metric tons of carbon dioxide equivalent or less, and price moves will be within 10% of the prior day’s close, according to the Shanghai Environment and Energy Exchange, which will host trading. Larger block trades are possible within 30% of the last closing price. Carbon has priced between 40 yuan ($6.18) a ton in pilot systems.