CAMBRIDGE, Mass., Nov. 28, 2016 /PRNewswire/ -- A report released today by consultants at global economic consulting firm The Brattle Group examines the economic and policy implications of different carbon dioxide (CO 2) allowance allocation approaches under the Clean Power Plan's (CPP) mass-based standard and/or carbon-cutting programs. The report recommends that if the primary objective for state policymakers is to minimize customer bills while reducing CO 2 emissions in accordance with the CPP goals, allowances or auction revenues should be allocated directly to customers or programs that directly benefit customers.
One of the options states have for CPP implementation is to set a mass-based limit on total CO 2 emissions from all covered electric generating units (EGUs) in the state. As part of these implementation plans, state regulators will need to determine how emissions allowances are initially distributed, whether by free allocation to individual entities or by centralized auctions to compliance entities. With substantial economic value at stake, the initial allowance distribution will have financial consequences for generation owners and electricity customers, including homes and businesses. The authors argue that when designing an implementation plan that includes the initial allowance distribution, policymakers should first design a plan that reflects overarching policy objectives, and then later consider the implications of individual constituents within the state. The report notes that by deferring any examination of wealth transfers among interested parties to a later stage, policymakers will be able to focus on achieving the best outcomes, consistent with their state's policy objectives.