Carbon allowances are issued by a government under an emissions cap-and-trade regulatory program. Each allowance (or emissions permit) typically allows its owner to emit one tonne of a pollutant such as CO2e. Under a cap-and-trade system, the supply of GHG allowances is limited by the mandated 'cap'.
Below are some examples of carbon allowance programs
WASHINGTON STATE CAP AND TRADE
Under the cap-and-invest program, businesses responsible for roughly 75% of Washington’s greenhouse gas emissions will have to obtain allowances to cover their emissions emitting more than 25,000 tCO2e/year.
California’s objective is to reduce greenhouse gas emissions by 40 percent below 1990 levels by 2030 – the most ambitious target in North America. Any facility that emits more than 25,000 tons of CO2e annually as well as fuel suppliers must comply with this program.