Post on 17-Jan-2016
Allowance Allocation Alternatives
Dallas BurtrawResources for the Future
February 28, 2005Sustainable Energy Roundtable:
“Multi-Pollutant Legislation”
Three Generic Approaches
Historic Updating Auction
Three Generic Approaches
Historic Updating Auction
SO2
Most states for NOx
Lead phase-outSome states for NOx
Sweden NOx tax
Spectrum VA for NOx
Historic Updating Auction
Three Generic Approaches
Important Subtleties
Historic Updating Auction
Input(Btu)
Output(MWh)
Important Subtleties
Historic Updating Auction
Input(Btu)
SO2
Some states for NOx
Spectrum VA for NOx
Output(MWh)
Some states for NOxLead phase-outSome states for NOx
Sweden NOx tax
Important Subtleties
Historic Updating Auction
Input(Btu)
SO2
Some states for NOx
Spectrum VA for NOx
Output(MWh)
Some states for NOxLead phase-outSome states for NOx
Sweden NOx tax
Common formula across fuels, sources?
Decision / Research Criteria
1. 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 CO2 where social
cost can be cut in half or more with auction.
Decision / Research Criteria
2. 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
Consumers Existing Assets New AssetsCoal Gas Non-
emittingAll All
Updating Historic Historic (for 3P)
Auction Historic Updating/Auction
• 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
3. 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