The EU Emissions Trading System (EU ETS) is an emission 'cap and trade' system that aims to reduce greenhouse gas (GHG) emissions by setting a limit, or cap on emissions.
Each year, a limited amount of EU Allowances (EUAs) is made available for trading in the market, and this is reduced yearly in order for the EU to meet its emissions reduction target. Each EUA gives companies the right to emit GHG emissions equivalent to the global warming potential of one tonne of CO2 equivalent.
