Full Title: Distribution of Allowances Under the Clean Power Plan
Author(s): Center for Energy and Climate Solutions
Publisher(s): Center for Energy and Climate Solutions
Publication Date: February 1, 2016
Full Text: Download Resource
Description (excerpt):
An emissions allowance is the legal right to emit one ton of carbon dioxide. Under a mass-based compliance approach for the Clean Power Plan, states must limit their total power sector emissions to a target level (e.g., expressed in tons of carbon dioxide) established by the U.S. Environmental Protection Agency (EPA). To comply with the target, regulated sources must obtain emissions allowances (typically, tradable permits) equal to the amount of their carbon dioxide emissions for each specified period. Note that in the Clean Power Plan, state emission targets decrease over time (starting in 2022 and thereafter), which guarantees that emission reductions actually occur. By limiting and reducing the number of allowances over time, the forces of supply and demand result in a market for tradable allowances, which in turn produces an allowance price.