Chapter 7 of 8
Year end
Hand over enough allowances, or pay a penalty and still owe them.
Carbonado
Carbon atom, four bonds · your guide to the market
At year end every regulated entity hands over allowances equal to what it owes. This is called surrender.
Suppose our plant skipped the auction and stayed 10,000 tonnes short. The penalty is 5 times the auction price per tonne: 10,000 × 5 × $12 = $600,000. And the 10,000 tonnes are still owed next year.
Buying them would have cost $120,000. The penalty is not a way out, it is the most expensive way to comply.
If a firm ends with more than it needs, the spare allowances stay in its account for next year. That is banking.
Carbonado says:
Remember this
Missing the target costs five times the market price and the debt follows you. Spare allowances follow you too, as savings.
In the game: The Year-End Accounts show what you surrendered, any penalty, and carbon cost as a share of gross profit.