carbon allowances systems

Synonyms

allowable emissions, emission allowances systems

Definition

The basic tradable commodity within GHG emission trading systems. Allowances grant their holder the right to emit a specific quantity of pollution once (e.g., one tonne of CO2eq). The total quantity of allowances issued by regulators dictates the total quantity of emissions possible under the system. At the end of each compliance period, each regulated entity must surrender sufficient allowances to cover their GHG emissions during that period (WRI, 2013).