Greenhouse gas emissions allowances, generically called CO2 allowances or carbon certificates, are traded rights, representing 1t of CO2 which was not released into athmosphere (non-emmitted CO2).
Carbon allowances within the EU ETS practically derive from the European Commission annual allocations to ETS countries and installations (EUAs), and from CO2 and other GHG emission reductions projects developed under the UN mechanisms, such as CDM (Clean Development Mechanism for CERs and JI (Joint Implementation for ERUs).
It is important not to mistake carbon allowances or carbon certificates for green certificates. The last mentioned refers to certificates obtained by the project developer of a renewable energy or green energy production unit.
The allowances traded within the EU ETS are the followings:
- EUA – Emission Unit Allowance (current allocations for ETS installations)
- EUAA – European Union Aviation Allowance (allocations for European airlines)
- CER – Certified Emission Reduction (units or allowances derived from CDM emissions reductions projects)
- ERU – Emission Reduction Unit (units or allowances derived from JI emissions reductions projects)
EUAs trading developed due to the existence of greenhouse gas emissions surplus or deficit compared to the initial cap set at the European level. The ETS installations, which have a surplus of EUAs as a consequence of low emissions then the allocated quota, have the right to sell this EUAs surplus, obtaining thus a benefit.
In the other sense, the ETS installations, which have EUAs deficit, determined by a greater production and, implicitly, by greater CO2 emissions, have to buy EUAs in order to comply at the end of the allocated year (end of April). The same applies for airlines that follow the same particularity concerning selling and buying of EUAAs.
In quantitative measures: 1 EUA = 1 EUAA = 1 CER = 1 ERU = 1 tonne CO2
Yet, their value differs due to several factors, and the price volatility of each allowance is very high, even in one day open trade.
Carbon Expert team remains at your service to help with your greenhouse gas emissions transactions within the European Emissions Trading Scheme since your business needs to optimally benefit from the CO2 trading and focus on its primary activities.
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