Definition:

Emission rights are tradable licences or permits that give companies, organizations or countries the right to emit a certain amount of greenhouse gases or pollutants into the atmosphere. These rights are often issued as part of emissions trading systems and are used to regulate and reduce the emission of greenhouse gases.

Main features of emission rights:

Allocation of emission rights: Governments or international organizations can distribute emission rights to companies or sectors, either free of charge or through auctions.

Caps on emissions: Emission rights specify how much greenhouse gas a particular entity or sector is allowed to emit. These caps can be reduced over time to reduce overall emissions.

Tradability: Emission rights are tradable, meaning that companies that keep their emissions below their assigned limits can sell surplus rights, while companies that exceed the limits must purchase additional rights.

Use of revenues: In some cases, governments use the revenue from the auctioning of emission allowances to fund climate protection and sustainability projects.

Types of emission rights:

CO2 emission rights: these rights relate to carbon dioxide (CO2) emissions and are often part of schemes to reduce CO2 emissions, such as the European Emissions Trading Scheme (EU ETS).

Pollutant emission rights: In addition to greenhouse gases, emission allowances can also be issued for other pollutants such as nitrogen oxides (NOx) or sulphur dioxide (SO2).

Objectives and benefits of emission allowances:

Reduction of greenhouse gas emissions: Emission rights are an instrument for limiting and reducing emissions in order to combat climate change.

Incentive to reduce emissions: Companies have an incentive to reduce emissions in order to sell surplus rights at a profit or avoid penalties for exceeding them.

Flexibility: Emissions trading allows companies to find cost-effective ways to reduce emissions rather than having to adhere to strict targets.

Source of revenue: Emissions allowance auctions can provide governments with revenue that they can use for environmental projects.

Carbon credits are an important part of international efforts to combat climate change and promote more sustainable economic practices. They promote the reduction of greenhouse gas emissions and the transition to a low-carbon economy.