The difference between the market price of electricity and the cost of generating electricity from coal, often used to assess the profitability of coal-fired power plants.

A financial derivative that gives the holder the right, but not the obligation, to buy or sell an underlying asset at a specified price within a specific time frame.

The trading unit is the carbon allowance, which represents the right to draw 1 ton of carbon from a capped carbon budget. In compliance markets, a regulatory entity fixes a certain amount (the cap) of allowed emissions for the year (the budget), and industrial polluters need to purchase allowances equivalent to their emissions. There are only as many allowances as the budget allows: the supply is capped. It is a regulated market in the sense that buyers have an obligation to hold allowances in equivalence to their emissions. Allowances are standard units issued by the regulatory body.