Allowance holders may transfer their allowances to other entities. Transfers of production and consumption allowances are subject to a 5% offset. For example, if a company receives 100 allowances through a transfer, EPA will deduct 105 allowances from the balance of the company transferring the allowances. EPA must approve the transfer before it becomes effective to ensure that the transferor has sufficient allowances and that the offset is correctly calculated.
Different rules apply to the transfer of application-specific allowances, which require a 1% offset. Allowances provided through the set-aside to new market entrants cannot be transferred.