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California’s New Gold: A Primer on the Use of Allowance Value Created under the CO2 Cap-and-Trade Program

Listed author(s):
  • Burtraw, Dallas


    (Resources for the Future)

  • McLaughlin, David
  • Szambelan, Sarah Jo
Registered author(s):

    California will enact an economy wide cap-and-trade program on CO2. Estimates of the value of tradable emissions allowances in the first year range from roughly $2.6 to $7.8 billion, when electricity and industry are covered under the program. Those sectors receive most of their allowances for free; electricity sector allowance value is directed to the benefit of ratepayers. In the first year a fraction of allowances, mostly with future year vintage, will be sold through an auction with a value of roughly $0.6 to $1.8 billion. That revenue will be returned to the California economy through appropriation by the legislature. Allowance auction revenue will grow five-fold in 2015 when transportation and natural gas are included. To whom does this revenue belong? This is the key unresolved issue in the design of the California program.

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    Paper provided by Resources For the Future in its series Discussion Papers with number dp-12-23.

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    Date of creation: 21 May 2012
    Handle: RePEc:rff:dpaper:dp-12-23
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    1. Dallas Burtraw & Karen Palmer, 2008. "Compensation rules for climate policy in the electricity sector," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 27(4), pages 819-847.
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