Evaluation of CO2 Emission Allocations as Part of the Regional Greenhouse Gas Initiative, Final Report. Retrieved from https://doi.org/doi:10.7282/T3WD41F2
DescriptionThis report examines the implications of three allocation approaches on the cost of CO2 allowances, wholesale electricity prices, production decisions by different types of generation units, and generation profitability. These interrelationships are illustrated using calculations and examples that may be typical of the types of qualitative impacts such a cap-and-trade program is likely to have. In addition, the report discusses several important issues related to the economic impact of the program, including leakage and several administrative issues. The report concludes that allocation of CO2 allowances is critical because it involves distributing, in effect, a large amount of money. The total value of the allowances is far greater than the compliance cost to meet the cap. The allocation scheme also has critical implications on the cost of electricity, the profitability of generation units, and the amount of leakage, and each allocation approach affects these issues differently.
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