An allowance is a permit that gives its holder the right to emit a specified amount of greenhouse gas, commonly one metric tonne of carbon dioxide equivalent. In systems such as the EU Emissions Trading System, regulated organizations must surrender enough allowances to cover their verified emissions.
Allowances matter because their supply and trading create a price signal: scarce permits can make emissions more costly and encourage reductions. Organizations track emissions, acquire or receive allowances, and surrender them by compliance deadlines. Accurate monitoring and secure records are essential; errors, unauthorized transfers, or falsified emissions data can undermine compliance and market integrity.