The great debate over emissions allowance distribution.
Sam Napolitano is director of the EPA Clean Air Markets Division. Erich Eschmann, Melanie LaCount and Elyse Steiner work in the Division on market-based program design and implementation.
There may be no more sure way to increase interest in a cap-and-trade policy discussion than to broach the subject of distributing allowances. Frequently it’s one of the first issues stakeholders want to talk about, and one of the last resolved. The value of allowances makes distributing them one of the most challenging aspects of setting up a trading program, despite the fact that other program design features carry far more weight in determining the program’s ultimate success. In fact, the allowance distribution methodology has very little indeed to do with achieving the environmental and human health goals of cap-and-trade programs. However, given the level of importance understandably ascribed to allowance distribution, stakeholders should consider carefully the choices and the implications of alternatives, particularly in the context of a potential nationwide greenhouse gas (GHG) policy.