For the Benefit of California Electricity Ratepayers: Electricity Sector Options for the Use of Allowance Value Created under California’s Cap-and-Trade Program
AbstractCalifornia will implement a cap-and-trade program to limit emissions of carbon dioxide covering industry and electricity sector emissions in 2013, expanding to cover transportation and natural gas in 2015. Although cap-and-trade would increase annual electricity costs for the average customer by $30 to nearly $100, the allowance value created under the program can offset all of these costs and even reduce electricity bills. California’s Air Resources Board has directed electricity regulators to ensure this allowance value is used for the benefit of electricity ratepayers. This paper surveys four options: (1) reducing electricity bills; (2) sending equivalent revenue directly to households in proportion to costs; or (3) as equal payments per customer account; and (4) making investments to improve the electricity system and help reduce emissions. Under special consideration is this question: Who will receive the allowance value associated with the electricity sector? We explore the implications of three specific proposals.
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Bibliographic InfoPaper provided by Resources For the Future in its series Discussion Papers with number dp-12-24.
Date of creation: 21 May 2012
Date of revision:
cap-and-trade; allocation; auction; public utility commission; investor-owned utility; energy efficiency; electricity rates;
Find related papers by JEL classification:
- Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters
- Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy
- L94 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Electric Utilities
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