--- description: "Under the EU Emissions Trading System (EU ETS), an allowance to emit one tonne of CO₂ equivalent (CO₂e). Installations, aircraft operators and shipping companies surrender one for each tonne of their verified emissions of the year before." title: "EU allowance (EUA): meaning and legal source" image: "https://greenfineprint.com/card/glossary/emission-allowance.png?v=1z0xcr4" url: "https://greenfineprint.com/glossary/emission-allowance" --- Glossary # EU allowance (EUA) Under the EU Emissions Trading System (EU ETS), an allowance to emit one tonne of CO₂ equivalent (CO₂e). Installations, aircraft operators and shipping companies surrender one for each tonne of their verified emissions of the year before. Legal source [ETS Directive, Article 3(a) ↗](https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX:02003L0087-20240301#art%5F3) Who it applies to Operators of installations, aircraft operators and shipping companies in the EU ETS: by 30 September each year, they surrender allowances equal to their verified emissions of the preceding calendar year. Allowances can be transferred between persons in the EU. Example A shipping company's ship has 8,000 tonnes of CO₂e counted under the EU ETS for 2026. For 2026, shipping companies surrender allowances for 100% of their verified emissions, so the company must surrender 8,000 allowances for that ship by 30 September 2027. Also known as EU allowance, EUA, emission allowance, EU ETS allowance, carbon allowance The ETS Directive ([Directive 2003/87/EC](https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX:02003L0087-20240301)) defines an allowance as an allowance to emit one tonne of carbon dioxide equivalent during a specified period, valid only for meeting the Directive's requirements and transferable under its rules. A tonne of CO₂e is one tonne of CO₂, or an amount of another greenhouse gas listed in the Directive with the same global-warming potential. Since 2021, the share of allowances that EU countries auction has been 57%. Allowances that aren't auctioned are allocated free of charge under harmonised rules ([free allocation](https://greenfineprint.com/glossary/free-allocation)), placed in the [market stability reserve](https://greenfineprint.com/glossary/market-stability-reserve) or cancelled. Allowances issued since 1 January 2013 are valid indefinitely. Once surrendered, they are cancelled; our [surrender of allowances](https://greenfineprint.com/glossary/surrender-of-allowances) page explains how. Commission guidance, not law: shipping companies use the same general EU allowances (EUA) as industry, the power sector and aircraft operators, and carbon credits or certificates can't be used for EU ETS compliance. Allowances also set the price of a [CBAM certificate](https://greenfineprint.com/glossary/cbam-certificate) under the Carbon Border Adjustment Mechanism (CBAM): the Commission calculates it as the average of the closing prices of EU ETS allowances at auction for each calendar week, and as a quarterly average for emissions declared for 2026. Our [explainer on the yearly compliance cycle](https://greenfineprint.com/articles/eu-ets-compliance-cycle) shows when allowances are due, and our [shipping explainer](https://greenfineprint.com/articles/eu-ets-shipping) works through the example above. ## Regulations DIRECTIVE 2003/87/EC In force Change pending ### [EU Emissions Trading System (EU ETS)](https://greenfineprint.com/regulations/eu-ets) Implementing Decision (EU) 2026/1862 set the cross-sectoral correction factor for free allocation at 100% for each year from 2026 to 2030 ## Used in PROPOSAL COM(2026) 153 In force Change pending ### [EU ETS market stability reserve: what the provisional deal on invalidating allowances would change](https://greenfineprint.com/articles/eu-ets-market-stability-reserve-invalidation) Council and Parliament provisionally agreed to keep invalidating EU ETS reserve allowances, but above 700 million instead of 400 million. Not law yet. 6 min read PROPOSAL COM(2026) 616 In force Change pending ### [EU ETS review 2026: what the Commission's proposal would change, for whom and from when](https://greenfineprint.com/articles/eu-ets-review-changes) What the Commission's July 2026 EU ETS review proposal would change for installations, ships, flights, waste incinerators and EU countries, and from when. 16 min read DIRECTIVE 2003/87/EC In force Change pending ### [EU ETS for shipping: what shipping companies must surrender, and who pays](https://greenfineprint.com/articles/eu-ets-shipping) EU ETS for ships of 5,000 gross tonnage and above carrying cargo or passengers to or from EU ports: which voyages count, what to surrender and who pays. 13 min read DIRECTIVE 2003/87/EC, ART. 10A AND 10B In force Change pending ### [EU ETS free allocation: benchmarks, the carbon leakage list and how free allowances are cut](https://greenfineprint.com/articles/eu-ets-free-allocation) How EU ETS free allowances are worked out for 2026-2030: benchmarks, the carbon leakage list, the 20% conditions, the CBAM factor and two pending proposals. 15 min read DIRECTIVE 2003/87/EC In force Change pending ### [EU ETS compliance deadlines: monitor, verify and surrender allowances each year](https://greenfineprint.com/articles/eu-ets-compliance-cycle) EU ETS operators must report verified emissions by 31 March and surrender allowances by 30 September. Each step, who acts, and what a shortfall costs. 10 min read DIRECTIVE 2003/87/EC In force Change pending ### [EU ETS scope: does it apply to your installation, and can small emitters be excluded?](https://greenfineprint.com/articles/eu-ets-installations-scope) Fuel-burning units totalling over 20 MW, or an Annex I activity over its threshold, put an installation in the EU ETS. 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