Featured Research

from universities, journals, and other organizations

Cap And Trade Policies Limiting Carbon Dioxide Can Increase Value Of Some Electricity Generating Firms

Date:
December 17, 2008
Source:
Wiley-Blackwell
Summary:
A new study explores ways to target the compensation provided by the free allocation of emission allowances under a carbon dioxide cap and trade policy.

A new study in the Journal of Policy Analysis and Management explores ways to target the compensation provided by the free allocation of emission allowances under a CO2 cap and trade policy in order to avoid overcompensation of firms that already are benefiting from the program.

Related Articles


In most prior cap and trade programs, emission allowances have been given away for free to pollution emitting firms as a way to compensate them for the costs imposed by the policy. In the case of a CO2 cap and trade program affecting the electricity sector, some firms actually profit from the policy and others lose. Consumers as a group will lose in the sense that they will see increases in electricity prices.

A cap and trade policy that limits emissions of CO2 can increase the value of some electricity generating firms. Free distribution of just 6 percent of the total allowances would be sufficient to compensate shareholders for the loss in market value on an industry-wide basis.

However, granting free allowances to compensate firms for their losses under a cap and trade policy can be costly. It is difficult to compensate losers without also compensating undeserving parties. The researchers find that compensating firms for the last $2.6 billion in losses at the federal level imposes a cost of roughly $25 billion.

“Climate policy promises to be more costly than all prior air pollution policies. The use of a cap and trade approach will help to keep the costs low, but it will impose costs on various sectors of the economy,” the authors note. “Information about how to deliver compensation in a cost-effective manner could help to increase the political acceptability of climate policy and help preserve a larger share of allowance value that might be used in ways that lower the costs of compliance with the program and, thereby lower the economic impact of the policy.”

Dallas Burtraw, Ph.D., and Karen Palmer, Ph.D., both of Resources for the Future, utilized a detailed simulation model of the electricity sector to quantify the effects of different allocation approaches on asset values for electricity generators.


Story Source:

The above story is based on materials provided by Wiley-Blackwell. Note: Materials may be edited for content and length.


Journal Reference:

  1. Dallas Burtraw, Karen Palmer. Compensation rules for climate policy in the electricity sector. Journal of Policy Analysis and Management, 2008; 27 (4): 819 DOI: 10.1002/pam.20378

Cite This Page:

Wiley-Blackwell. "Cap And Trade Policies Limiting Carbon Dioxide Can Increase Value Of Some Electricity Generating Firms." ScienceDaily. ScienceDaily, 17 December 2008. <www.sciencedaily.com/releases/2008/12/081217123821.htm>.
Wiley-Blackwell. (2008, December 17). Cap And Trade Policies Limiting Carbon Dioxide Can Increase Value Of Some Electricity Generating Firms. ScienceDaily. Retrieved October 25, 2014 from www.sciencedaily.com/releases/2008/12/081217123821.htm
Wiley-Blackwell. "Cap And Trade Policies Limiting Carbon Dioxide Can Increase Value Of Some Electricity Generating Firms." ScienceDaily. www.sciencedaily.com/releases/2008/12/081217123821.htm (accessed October 25, 2014).

Share This



More Earth & Climate News

Saturday, October 25, 2014

Featured Research

from universities, journals, and other organizations


Featured Videos

from AP, Reuters, AFP, and other news services

EU Gets Climate Deal, UK PM Gets Knock

EU Gets Climate Deal, UK PM Gets Knock

Reuters - Business Video Online (Oct. 24, 2014) EU leaders achieve a show of unity by striking a compromise deal on carbon emissions. But David Cameron's bid to push back EU budget contributions gets a slap in the face as the European Commission demands an extra 2bn euros. David Pollard reports. Video provided by Reuters
Powered by NewsLook.com
Deep Sea 'mushroom' Could Be Early Branch on Tree of Life

Deep Sea 'mushroom' Could Be Early Branch on Tree of Life

Reuters - Innovations Video Online (Oct. 24, 2014) Miniature deep sea animals discovered off the Australian coast almost three decades ago are puzzling scientists, who say the organisms have proved impossible to categorise. Academics at the Natural History of Denmark have appealed to the world scientific community for help, saying that further information on Dendrogramma enigmatica and Dendrogramma discoides could answer key evolutionary questions. Jim Drury has more. Video provided by Reuters
Powered by NewsLook.com
Raw: Tornado Rips Roofs in Washington State

Raw: Tornado Rips Roofs in Washington State

AP (Oct. 24, 2014) A rare tornado ripped roofs off buildings, uprooted trees and shattered windows Thursday afternoon in the southwest Washington city of Longview, but there were no reports of injuries. (Oct. 24) Video provided by AP
Powered by NewsLook.com
Fast-Moving Lava Headed For Town On Hawaii's Big Island

Fast-Moving Lava Headed For Town On Hawaii's Big Island

Newsy (Oct. 24, 2014) Lava from the Kilauea volcano on Hawaii's Big Island has accelerated as it travels toward a town called Pahoa. Video provided by Newsy
Powered by NewsLook.com

Search ScienceDaily

Number of stories in archives: 140,361

Find with keyword(s):
Enter a keyword or phrase to search ScienceDaily for related topics and research stories.

Save/Print:
Share:

Breaking News:

Strange & Offbeat Stories


Plants & Animals

Earth & Climate

Fossils & Ruins

In Other News

... from NewsDaily.com

Science News

Health News

Environment News

Technology News



Save/Print:
Share:

Free Subscriptions


Get the latest science news with ScienceDaily's free email newsletters, updated daily and weekly. Or view hourly updated newsfeeds in your RSS reader:

Get Social & Mobile


Keep up to date with the latest news from ScienceDaily via social networks and mobile apps:

Have Feedback?


Tell us what you think of ScienceDaily -- we welcome both positive and negative comments. Have any problems using the site? Questions?
Mobile: iPhone Android Web
Follow: Facebook Twitter Google+
Subscribe: RSS Feeds Email Newsletters
Latest Headlines Health & Medicine Mind & Brain Space & Time Matter & Energy Computers & Math Plants & Animals Earth & Climate Fossils & Ruins