A UK Allowance (UKA) is an emissions allowance tradable within the UK Emissions Trading System (UK ETS). Each allowance accounts for 1 tonne of greenhouse gas emissions. Companies operating within the UK ETS are required to surrender enough allowances to cover the greenhouse gases they have emitted at the end of each year. The trading of these allowances between companies creates a robust carbon price which drives emissions reductions over time.
The first UKAs are to be auctioned in Q2 2021 and will be sold with a ‘floor price’ of £22.00.