EU Allowances (EUAs) are carbon permits used within the EU Emissions Trading System (EU ETS). Each allowance represents the right to emit one tonne of carbon dioxide (CO₂) or its equivalent.
Companies in sectors such as power generation, aviation, and heavy industry must surrender enough allowances each year to cover their verified emissions. Organisations that emit less than their allowance allocation can sell excess permits, while those exceeding their allocation must purchase additional allowances.
The EU ETS creates a market-driven price for carbon, encouraging companies to reduce emissions and invest in cleaner technologies.
UK Allowances (UKAs) are used within the UK Emissions Trading Scheme (UK ETS), introduced in 2021 following the UK’s departure from the EU ETS.
Like EUAs, each UK Allowance represents one tonne of CO₂ equivalent emissions. Businesses covered by the scheme, including power generators, energy-intensive industries, and aviation operators, must purchase and surrender allowances equal to their annual emissions.
The UK ETS limits the number of allowances available in the market, ensuring emissions decline over time while providing flexibility through carbon trading.
For organisations participating in the EU ETS and UK ETS, effective procurement and management of allowances is essential for regulatory compliance and cost control.
Redshaw Advisors can help you in the following areas:
