Rex says
Money math without the spreadsheet headache. Plug in your numbers and I'll show you exactly where the dollars land.
Try a scenario
Click to load — tweak from there.Inputs
Result
Estimated compliance cost
$416,000
Allowance shortfall
13,000
Share covered by free allowances
78.3%
Average cost per ton of covered emissions
$6.93
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How to use this
- 1Enter covered emissions (tCO2e).
- 2Enter free allowances allocated (tCO2e).
- 3Enter allowance price ($/ton).
- 4Enter banked allowances from prior years (tCO2e).
- 5Read your estimated compliance cost on the right — it updates as you type.
- 6Hit Share to keep the scenario or send it to someone.
About this calculator
For facilities covered under an actual regulatory carbon pricing program — California's cap-and-trade, the EU Emissions Trading System, or Washington State's Climate Commitment Act — the liability isn't hypothetical, it's a real compliance obligation with allowances or credits that must be surrendered against actual emissions. This calculator estimates your liability by comparing covered emissions against any free allowances you're allocated, then pricing the shortfall at the current allowance market price. It also separates out the portion covered by free allocation, since most cap-and-trade programs phase down free allowances over time, meaning the same facility's liability tends to grow year over year even at flat emissions and flat allowance prices, purely from allocation benchmarks tightening.
Worked example
Using the values the calculator loads with:
Inputs
- Covered emissions: 60000 tCO2e
- Free allowances allocated: 45000 tCO2e
- Allowance price: 32 $/ton
- Banked allowances from prior years: 2000 tCO2e
Results
- Estimated compliance cost: $416,000
- Allowance shortfall: 13,000
- Share covered by free allowances: 78.3%
- Average cost per ton of covered emissions: $6.93
What each field means
Inputs
- Covered emissions (tCO2e)
- The covered emissions used in the calculation, measured in tCO2e. Starts at 60000 tCO2e so you have a working example on load.
- Free allowances allocated (tCO2e)
- The free allowances allocated used in the calculation, measured in tCO2e. Starts at 45000 tCO2e so you have a working example on load.
- Allowance price ($/ton)
- The allowance price used in the calculation, measured in $/ton. Starts at 32 $/ton so you have a working example on load.
- Banked allowances from prior years (tCO2e)
- The banked allowances from prior years used in the calculation, measured in tCO2e. Starts at 2000 tCO2e so you have a working example on load.
Results
- Estimated compliance cost
- Returned as a money amount in US dollars and shown as the headline result. It recalculates instantly whenever you change an input, so you can compare scenarios without reloading.
- Allowance shortfall
- Returned as a whole number. It recalculates instantly whenever you change an input, so you can compare scenarios without reloading.
- Share covered by free allowances
- Returned as a percentage. It recalculates instantly whenever you change an input, so you can compare scenarios without reloading.
- Average cost per ton of covered emissions
- Returned as a money amount in US dollars. It recalculates instantly whenever you change an input, so you can compare scenarios without reloading.
FAQ
Why do free allowances shrink over time even if my emissions stay flat?
Most cap-and-trade programs, including California's and the EU ETS, apply a declining allocation benchmark that tightens the free allowance formula annually to drive the program's overall emissions cap downward. A facility with genuinely flat emissions will see its free allocation shrink and its liability grow purely from that mechanical tightening.
Can I bank allowances for future years?
Most programs allow limited banking of unused allowances or offset credits into future compliance periods, subject to program-specific caps and sometimes vintage restrictions. Banking is a common strategy to smooth compliance costs across years with variable production or emissions, but check your specific program's banking rules since they vary significantly.
How volatile are allowance prices?
California Carbon Allowance prices have ranged roughly $15-40/ton over the program's history, with price floors and ceilings (the Allowance Price Containment Reserve) designed to limit extreme swings. EU ETS prices have been more volatile historically, ranging from single digits to over €100/ton depending on policy tightening and energy market conditions.
Accuracy and limitations
- Results are estimates before tax, fees, and inflation unless an input explicitly covers them.
- Rates are treated as fixed for the whole period — variable-rate products will drift from this projection.
- This is educational maths, not financial advice. Check anything contractual with the lender or your accountant.
Related tools
Cite this calculator
Writing about this topic? Grab a citation — every link helps keep these tools free.
RevenueLab. (2026). Carbon Tax Liability Calculator. Retrieved from https://www.revenuelab.fyi/toolbox/carbon-tax-liability
<p>Source: <a href="https://www.revenuelab.fyi/toolbox/carbon-tax-liability" target="_blank" rel="noopener">Carbon Tax Liability Calculator — RevenueLab</a> (2026).</p>
Source: [Carbon Tax Liability Calculator — RevenueLab](https://www.revenuelab.fyi/toolbox/carbon-tax-liability) (2026).