Updating the Allocation of Greenhouse Gas Emissions Permits in a Federal Cap-and-Trade Program
AbstractU.S. adoption of a cap-and-trade program for greenhouse gases could place some domestic producers at a disadvantage relative to international competitors who do not face similar regulation. To address this issue, proposed federal climate change legislation includes a provision that would freely allocate (or rebate) emission allowances to eligible sectors using a continuously updating output-based formula. Eligibility for the rebates would be determined at the industry-level based on emissions or energy intensity and a measure of import penetration. Dynamic updating of permit allocations has the potential to mitigate adverse competitiveness impacts and emissions leakage in eligible industries. It can also undermine the cost-effectiveness of permit market outcomes, as more of the mandated emissions reductions must then be achieved by sources deemed ineligible for rebates. This chapter investigates both the benefits and the costs of output-based updating. It identifies differences between proposed eligibility criteria and those consistent with standard measures of economic efficiency. The analysis underlines the importance of taking both benefits and costs into account when determining the scale and scope of output-based rebating provisions in cap-and-trade programs.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 16307.
Date of creation: Aug 2010
Date of revision:
Publication status: published as Meredith Fowlie. "Updating the Allocation of Greenhouse Gas Emissions Permits in a Federal Cap-and-Trade Program," in Don Fullerton and Catherine Wolfram, editors, "The Design and Implementation of US Climate Policy" University of Chicago Press (2012)
Contact details of provider:
Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.
Web page: http://www.nber.org
More information through EDIRC
Find related papers by JEL classification:
- Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy
This paper has been announced in the following NEP Reports:
- NEP-ALL-2010-09-03 (All new papers)
- NEP-ENE-2010-09-03 (Energy Economics)
- NEP-ENV-2010-09-03 (Environmental Economics)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Ian W. H. Parry & Roberton C. Williams III & Lawrence H. Goulder, 1997.
"When Can Carbon Abatement Policies Increase Welfare? The Fundamental Role of Distorted Factor Markets,"
NBER Working Papers
5967, National Bureau of Economic Research, Inc.
- Parry, Ian W. H. & Williams, Roberton III & Goulder, Lawrence H., 1999. "When Can Carbon Abatement Policies Increase Welfare? The Fundamental Role of Distorted Factor Markets," Journal of Environmental Economics and Management, Elsevier, vol. 37(1), pages 52-84, January.
- Parry, Ian & Goulder, Lawrence & Williams III, Roberton, 1997. "When Can Carbon Abatement Policies Increase Welfare? The Fundamental Role of Distorted Factor Markets," Discussion Papers dp-97-18-rev, Resources For the Future.
- Lawrence H. Goulder & Ian W. H. Parry, 2008.
"Instrument Choice in Environmental Policy,"
Review of Environmental Economics and Policy,
Association of Environmental and Resource Economists, vol. 2(2), pages 152-174, Summer.
- repec:reg:rpubli:47 is not listed on IDEAS
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ().
If references are entirely missing, you can add them using this form.