European Union Allowance (EUA) means the tradable unit under the European Union Emissions Trading Scheme (EU ETS), giving the holder the right to emit one tonne of carbon dioxide (CO2), or the equivalent amount of two more powerful greenhouse gases, nitrous oxide (N2O) and perfluorocarbons (PFCs).


Article 3(a) of the EU ETS Directive defines the emission allowance as being “an allowance to emit one tonne of carbon dioxide equivalent during a specified period, which shall be valid only for the purposes of meeting the requirements of this Directive and shall be transferable in accordance with the provisions of this Directive”.


With MiFID II, emission allowances have become financial instruments under Annex I, Section C (11).


In contrast to energy markets, spot markets of emission allowances do not fall under the realm of REMIT.


Furthermore, despite being subject to weekly and daily position reporting, derivatives on emission allowances do not fall under the definition of commodity derivatives under MiFID II and are therefore not subject to position limits and position management controls (ESMA Preliminary report of 15 November 2021, Emission Allowances and derivatives thereof, ESMA70-445-7).




IMG 0744   Documentation




Legal nature of emission allowances





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