1. CO2 Allowance Allocations in RGGI
RGGI Stakeholder Meeting
May 2, 2006
Larry DeWitt
Pace Energy Project

2. Conceptual Basis for Allocation of Allowances
Allowances are a Public Good
Pollution is another cost of production
Consistency with competitive markets: let the market work.
Regulatory Risk is a part of this market (Rio Agreement: 1992).
The Public (consumers), who pay market price increases, should receive proceeds of all allowance sales.

3. Analytic Reality for Allowances
Generators charge consumers for allowances even if allowances are free
Major “losers” under an auction are coal plants— but they are a low-cost provider and are mostly giving up some margin, not incurring actual losses