auctions are part of the ED/NRDC plan and have been all along.

I'm pretty sure the only economists that are pushing for free allocation would be those that receive their paychecks from DuPont, GE, etc.

As Brit, I'm aware of the merits of the third option,

sometimes called TCQs (Tradeable Carbon Quotas)

as recommended by UK Environment Sec.y Milliband,

for the acknowledgement of each person's GHG output entitlement,
under an annually declining national GHG budget,

and its formal accreditation as a usable and/or tradeable asset.

This empowerment avoids the surreal absurdity of giving windfall profits
to profiteering corporate polluter-shareholders
(under grandfathering),

and avoids the fundamental inequity of energy usage rights
being granted according to peoples' wealth
(under 'vending', and, notably, under a carbon tax).

That this third option of TCQs gets no coverage in US affairs is no surprise,

but I'm puzzled that it isn't widely discussed by US activists,
as its merits are very relevant for sustainable development.

A further aspect of the welcome discussion of carbon pricing mechanisms,

is that nothing of significance will be done nationally before an international treaty commitment is agreed.

If, as seems highly probable, that treaty results in GHG output entitlement
being surplus in the G-South, and scarce in the G-North,
then wealthy 'northern' nations will need to fund the purchase of GHG output entitlement,
until such time as it gets clean of fossil carbon dependence.

My guess is that there are already UK officials
 quietly planning to put a levy on TCQs to raise those vital funds.

Why else did the UK govt give Milliband so much policy freedom ?

Regards,

Bill

My sincere apologies for typos.
Herewith, without.

As a Brit, I'm aware of the merits of the third option,

sometimes called TCQs (Tradeable Carbon Quotas)

as recommended by UK Environment Sec.y Milliband,

for the acknowledgement of each person's GHG output entitlement,

under an annually declining national GHG budget,

and its formal accreditation as a usable and/or tradeable asset.

This empowerment avoids the surreal absurdity of giving windfall profits
to profiteering corporate polluter-shareholders
(under 'grandfathering'),

and avoids the fundamental inequity of energy usage rights
being granted according to peoples' wealth
 (under 'vending', and, notably, under a carbon tax).

That this third option of TCQs gets no coverage in US affairs is no surprise,

but I'm puzzled that it isn't more widely discussed by US activists,
as its merits are very relevant for sustainable development.

A further aspect of this welcome discussion of carbon pricing mechanisms,

is that nothing of significance will be done nationally
before an international treaty commitment is agreed, ratified and in force.

If, as seems highly probable, that treaty results in GHG output entitlement
being surplus in the G-South, and scarce in the G-North,
then wealthy 'northern' nations will need to fund the purchase of GHG output entitlement,
until such time as they get clean of fossil carbon dependence.

My guess is that there are already UK officials
 quietly planning to put a levy on TCQs to raise those vital funds.

Why else did the UK govt give Milliband so much policy freedom ?

Regards,

Bill

Nothing's going to happen under the Bush administration, because we won't commit to anything domestically without international linkage that also brings about a better emissions path in China, and Bush doesn't care to negotiate such a deal.

Policy at home will be as much about politicians doling out pork as about effective policy - and until now, the policy delay has all been about pork - by allowing the fossil fuel producers and major users to graze for free on the global commons, while passing the costs off to the future.

A tax approach would be most effcient, as cap and trade leave continuing incentives for cheating and for new allocations, and with Congresscritters eager to assist.  But no one has the courage to push taxes, as Americans prefer a more costly free lunch approach.  Cap and trade approaches also involve Government unilaterally holding that it has the right to create and allocate property rights in the atmosphere, which some might find a bit troubling.  I would prefer to see these rights distributed by a trust fund that would distribute the proceeds annually to citizens on a per capita basis.

But if want to have something, cap and trade is probably the best we can get, and although I favor auctions, I realize that a free allocation might be the best way to reduce political opposition by powerful industries - even as it is clearly a windfall.  

But the emissions reductions and market impact of creating carbon pricing signals are the same whether the permits are dirstibuted free or auctioned.  What really matters are the emissions levels at which permits are set, and whether offsets are permitted and how they are verified.

I would prefer to rely solely on the pricing effects of the permits to call forth investment in varius technologies, and to avoid politcial pork barrel that will only waste money and slow the development of the best meaningful mitigation technologies.

In any case implementing a cap and trade system at the upstream levels seems far more easily administeres than doling them out at the level of individuals, such as Milliband suggests.

David,

You've hit the issue spot on - and worth noting that both RGGI and Kyoto got it wrong.  It is politically vastly easier to allocate, for the simple reason that the deepest pockets like it.  But it makes no policy sense - as Kyoto has shown.  

Consider an allocated world.  Dirty old coal plant is allocated because they're there pre-cap.  New combined cycle gas plant wants to come on line, displacing said coal plant's load.  Gas plant has to pay for it's carbon, runs the economics and finds not only that it has to pay charges that the coal plant doesn't, but also that the clearing price of power on the grid is artificially depressed by the fact that the dirty old coal plants haven't had to pay, nor factor that cost into their price.  Ergo, clean(er) gas doesn't get built while the coal plant keeps operating.  All in the name of carbon reduction.

I'm amused to see that despite a fairly clear description of the actual spread of three choices for putting a price on carbon,
Gristers have shown an almost total lack of interest in anything other that the mutually deficient options of the Grandfathering or Vending of emissions entitlements.

While the sole response to Acknowledgement, in the form of TCQs, was merely dismissive.

So are Americans really so trained that they're looking for American solutions to a Global problem ?
And nothing but an American solution will, in fact, get discussed ?

Meanwhile, here in the UK,
where discussions seem at least marginally more rational,
Milliband, (Environment Sec.y who firmly boosted TCQs)
has been promoted to Foreign Secretary (equiv State Dept) in the new govt under Gordon Brown.

So I guess you'll be hearing rather more of certain un-American ideas in the near future.

Regards,

Bill