Allowance Price Index

A metric used in carbon markets to track and report the average price of carbon allowances, which are permits that allow entities to emit a certain amount of greenhouse gases (GHGs). These allowances are typically traded within cap-and-trade systems, where the total number of allowances is capped to limit overall emissions. The price index reflects the current market value of these allowances and is influenced by supply and demand dynamics, regulatory changes, and broader economic conditions. The Allowance Price Index is an important indicator for companies, investors, and policymakers as it helps gauge the cost of carbon and the economic impact of emission reduction policies.