Emission allowances are issued by the Government or purchased from the trading market under an emission trading scheme. An emission trading scheme (ETS) is a tool that puts a quantity limit and a price on emissions. Each allowance typically allows a company to emit one tonne of greenhouse gases such as CO2. Under ETS, an ETS participating company must obtain sufficient tradeable emission allowances to compensate for their emission of pollutants and to settle their emission liabilities. The company that reduces its emission liabilities may have surplus emission allowances that it can sell to others in the trading market. An emission allowance can be used for a period of up to two years from the date of issue. For example, an emission allowance that is issued on 1 January 2022 can be used to settle the obligations (emission liabilities) arising from emissions generated during the three-year period ended 30 December 2024. QUEEN Industry, as an ETS participating company, must obtain the emission allowances and submit them to the Government, based on the amount of greenhouse gases emitted during the year. During the 2021/2022 financial year, the company had following events. On 1 January 2022, QUEEN Industry received 10,000 emission allowances at no cost from the Government. Each allowance represents the right to emit one tonne of greenhouse gases. The fair value of an allowance was $60 on the grant day. On 1 June 2022, QUEEN Industry purchased additional 30,000 allowances on the market as the initially granted emission allowances seemed insufficient to settle their obligations (emission liabilities). On this date, the fair value of an allowance was $50.

Measurement basis to use when measuring the purchased emission allowances