Terminology
Cap and Trade Schemes
Cap-and-Trade
A system for controlling emissions of environmental pollutants, whereby overall emissions are capped, but actors covered can allocatae emissions rights by trading.
To control greenhouse gas emissions, the Kyoto Protocol established a Cap and Trade system that obliges Annex I/B countries to cap their national emissions at the level of their Assigned Amounts, and permits countries that are having difficulty staying below their caps to purchase carbon credits called Assigned Amount Units from other Annex I/B countries that have excess emissions reduction credits to sell. Also referred to as International Emissions Trading.
Cap and Trade Schemes
Emissions trading schemes created by Annex I/B countries that wish to defer some of the responsibility to reduce emissions to domestic actors, such as businesses, by setting caps and allocating emission rights that domestic businesses can trade among themselves.
The most notable example of a domestic cap and trade scheme is the European Union Emissions Trading Scheme.
European Union Emissions Trading Scheme (EU ETS)
Cap and trade scheme for carbon dioxide emissions of major industrial sectors in the EU.
ETS Allowances (EUA)
Carbon credits allocated to installations covered by the EU ETS as tradable commodities. One allowance is equal to one ton of CO2e.
EUAs may be allocated for free or auctioned to the highest bidder.
ETS Allocation
The number of allowances (credits) held by an installation covered by the EU ETS for a compliance period.
ETS National Allocation Plan (NAP)
Document prepared for each EU Member State in advance of each phase of the EU ETS, setting out allocations to individual installations in that country for that phase.