Rob Stavins on cap-and-trade in the U.S. Senate:
There may be sound reasons for concern about the developing Senate bill, but the so-called “free allocation” should not be one of them. Indeed, this debate is unfortunately repeating the confusion which was prevalent in the press and the blogosphere about the allowance allocation in the Waxman-Markey legislation in the House of Representatives (H.R. 2454).
Rather than being a “massive corporate give-away” of 80% of the allowances to private industry — as it was frequently characterized — the H.R. 2454 allowance allocation would result in precisely the opposite, namely, about 80% of the value of allowances accruing to consumers, small business, and public purposes, and some 20% accruing to covered, private industry (a split which is roughly consistent with the recommendations from independent economic research).
And directly to Senator Murkowski’s and others’ concern, the nature of the free allocation of allowances does not — with some relatively minor exceptions — affect either the environmental performance or the overall social cost of the system.
