The Consumer Burden of a Cap-and-Trade System with Freely Allocated Permits

Aparna Mathur, Kevin A. Hassett, Gilbert E. Metcalf
Content Type
Working Paper
American Enterprise Institute for Public Policy Research
In discussions over how best to implement mandatory restrictions on carbon, the most commonly discussed option is a cap-and-trade system. One critical economic question surrounding cap-and-trade is how to distribute the permits. The two main competing mechanisms are free allocations to polluters (usually based on past emissions levels, output levels, or carbon intensity) and the auction of permits.
Climate Change, Economics, Environment, Markets