Cap and trade explained

The video discusses the harmful effects of emissions and introduces the cap and trade system as a market-based mechanism to reduce emissions while minimizing economic impact. It explains how emissions permits are allocated and traded, incentivizing pollution reduction. However, a major drawback is that polluters can relocate to countries without such legislation, continuing to pollute freely.

In what way do market mechanisms incentivize pollution reduction?

What is a major drawback of the cap and trade system?