Carbon market and EU ETS: the European allowance system
The EU ETS is the European Union's carbon market. It caps emissions from industrial sectors and imposes a carbon price via tradable allowances.
The cap-and-trade principle
An emissions cap is set then reduced each year. Covered installations (energy, heavy industry, aviation) must surrender allowances for their emissions. As the cap falls, the allowance price rises, incentivising reduction.
Who is concerned
Large industrial and energy emitters. The CBAM extends this logic to imports. Even outside the ETS, the carbon price affects costs and strategy. UltraCarbon helps measure carbon exposure.
Frequently asked questions
EU ETS and CBAM, what link?
The CBAM applies a carbon price to imports equivalent to the EU ETS, to prevent carbon leakage.
Is my company in the EU ETS?
Only if it operates covered installations (heavy industry, energy, aviation). Others are concerned indirectly.