Allowance allocation alternatives
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Allowance Allocation Alternatives. Dallas Burtraw Resources for the Future February 28, 2005 Sustainable Energy Roundtable: “Multi-Pollutant Legislation”. Three Generic Approaches. Three Generic Approaches. Three Generic Approaches. Important Subtleties. Important Subtleties.

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Allowance Allocation Alternatives

Dallas Burtraw

Resources for the Future

February 28, 2005

Sustainable Energy Roundtable:“Multi-Pollutant Legislation”


Three Generic Approaches


Three Generic Approaches


Three Generic Approaches


Important Subtleties


Important Subtleties


Important Subtleties

  • Common formula across fuels, sources?


Decision / Research Criteria

  • Efficiency

    • Auction always best.

    • Second-best (historic) depends on regulation in electricity sector.

    • However, with ‘3P’s the distinction is not great.

    • Importance is as precedent for CO2where social cost can be cut in half or more with auction.


Decision / Research Criteria

  • Compensation

    • Producers vs. Consumers.

    • Different producer interests

      • Existing coal

      • Gas, new sources.

    • Principles:

      • Political compromise.

      • Time is compensation.

      • Possibility for over-compensation (not likely for ‘3P’).


Preferred Method of Allocation

  • In competitive regions the auction does relatively better. This is due to the resource mix.

  • A move to competition makes historic more profitable for emitters.


Decision / Research Criteria

  • Incentives for Technical Change

    • Motivation supports updating & auction.

    • We’ve looked at insufficiently.

    • Auction could be most potent – Depends what is done with auction revenues.


For More Information

www.rff.org/multipollutant


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