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Climate Policy's Uncertain Outcomes for Households: The Role of Complex Allocation Schemes in Cap-and-Trade

Listed author(s):
  • Blonz Joshua

    ()

    (Resources for the Future)

  • Burtraw Dallas

    ()

    (Resources for the Future)

  • Walls Margaret A

    ()

    (Resources for the Future)

The design and implementation of the allocation of CO2 emissions allowances in recent bills in the U.S. Congress introduces a new source of uncertainty to the climate policy debate. We examine the Waxman-Markey bill (H.R. 2454) with scenarios that vary outcomes associated with allocations to electricity local distribution companies, investments in energy efficiency and technology development. The average net household burden in 2016 ranges from $133, with a CO2 allowance price of $13.19, to $418, with an allowance price of $23.41. The uncertainty about average burdens does not carry over to the distribution of those burdens; both scenarios impose the greatest burden as a percentage of income on middle-income households. A third scenario that allocates a substantial portion of allowance value as lump-sum payments imposes an average net household burden of $206, with a price of $17.37 and with highly progressive distributional impacts.

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Article provided by De Gruyter in its journal The B.E. Journal of Economic Analysis & Policy.

Volume (Year): 10 (2010)
Issue (Month): 2 (November)
Pages: 1-35

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Handle: RePEc:bpj:bejeap:v:10:y:2010:i:2:n:5
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  1. Parry, Ian, 2003. "Are Emissions Permits Regressive?," Discussion Papers dp-03-21, Resources For the Future.
  2. Toshi H. Arimura & Shanjun Li & Richard G. Newell & Karen Palmer, 2011. "Cost-Effectiveness of Electricity Energy Efficiency Programs," NBER Working Papers 17556, National Bureau of Economic Research, Inc.
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  4. Don Fullerton & Garth Heutel, 2007. "The General Equilibrium Incidence of Environmental Mandates," NBER Working Papers 13645, National Bureau of Economic Research, Inc.
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  6. Lawrence H. Goulder & Ian W. H. Parry & Roberton C. Williams III & Dallas Burtraw, 1998. "The Cost-Effectiveness of Alternative Instruments for Environmental Protection in a Second-Best Setting," NBER Working Papers 6464, National Bureau of Economic Research, Inc.
  7. Palmer, Karen & Newell, Richard & Gillingham, Kenneth, 2004. "Retrospective Examination of Demand-side Energy-efficiency Policies," Discussion Papers dp-04-19, Resources For the Future.
  8. 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.
  9. Burtraw, Dallas & Sweeney, Richard & Walls, Margaret, 2009. "The Incidence of U.S. Climate Policy: Alternative Uses of Revenues from a Cap-and-Trade Auction," Discussion Papers dp-09-17-rev, Resources For the Future.
  10. Kevin A. Hassett & Aparna Mathur & Gilbert E. Metcalf, 2009. "The Incidence of a U.S. Carbon Tax: A Lifetime and Regional Analysis," The Energy Journal, International Association for Energy Economics, vol. 0(Number 2), pages 155-178.
  11. Jonathan Fisher, 2006. "Income Imputation and the Analysis of Expenditure Data in the Consumer Expenditure Survey," Working Papers 394, U.S. Bureau of Labor Statistics.
  12. Poterba, James M, 1989. "Lifetime Incidence and the Distributional Burden of Excise Taxes," American Economic Review, American Economic Association, vol. 79(2), pages 325-330, May.
  13. repec:ntj:journl:v:55:y:2002:i:n._2:p:199-221 is not listed on IDEAS
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