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.

Climate Policy Compliance Market

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LATEST VISUAL LEARNING

This chart shows the total amount of man-made emissions created by the world's biggest polluters.
The amount of atmospheric CO2 has charted a steady climb higher. The Mauna Loa Observatory on the north flank of volcano of the same name
Article 6 of the Paris Agreement lays out the principles and guidelines for a country-level carbon market, in which countries may generate carbon offsets either
The idea of carbon border charges has garnered plenty of attention in recent years, particularly as the European Union rolled out its Carbon Border Adjustment
While a lot of our education focuses on either the compliance or the voluntary carbon markets, this month, we would like to shed some light

28 October 2024

GLOSSARY
Article 6

Article 6 of the Paris Agreement lays out the principles and guidelines for a country-level carbon market, in which countries may generate carbon offsets either to meet their own emissions reduction targets...

25 September 2024

ARTICLES
What is a Carbon Border Adjustment Mechanism?

The idea of carbon border charges has garnered plenty of attention in recent years, particularly as the European Union rolled out its Carbon Border Adjustment Mechanism (CBAM) in 2023.

24 October 2024

HIGHLIGHTS
UN body moves forward on carbon methodologies, removals

While a lot of our education focuses on either the compliance or the voluntary carbon markets, this month, we would like to shed some light on a third type of market that we are also working on.

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