Emission allowances are permits that allow companies to emit a certain amount of greenhouse gases into the atmosphere. Each allowance typically represents one ton of carbon dioxide or its equivalent in other gases. These allowances are part of a regulatory system designed to limit overall emissions and encourage companies to reduce their carbon footprint. Companies can buy, sell, or trade these allowances in a market, creating a financial incentive to lower emissions. If a company reduces its emissions below its allowance, it can sell the excess to others that need more. This system aims to promote environmental responsibility while allowing economic flexibility.