VISUAL LEARNING

How the EU ETS Works

This graphic illustrates how carbon trading actually works under the EU Emissions Trading System. Company A’s emissions are below its free allocation of carbon allowances, creating a surplus. Company B’s emissions are above its free allocation, meaning it doesn’t have enough allowances to comply with the system and is facing fines for potential non-compliance. Company B has three options to meet its obligations: buy surplus allowances from Company A; buy allowances from government auctions; or reduce its emissions to avoid having to buy any allowances.

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Climate Policy Compliance Market

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Partner with the Carbonwise team to produce innovative educational content on Carbon Markets.