Distribution of Emissions Permits to the U.S. Pulp and Paper Sector under Alternative Output-Based Allocation Schemes

Under a cap-and-trade climate policy, emissions allowances—tradable rights to emit a fixed amount of greenhouse gases—become scarce and valuable resources that change the economic incentives to implement more energy-efficient processes and energy management practices, and to select fuels with lower carbon content. A key question accompanying the design of any such policy is how to allocate these allowances. This paper examines how key design elements and industry characteristics affect the distribution of allowances to U.S. pulp and paper firms under three variations of a proposed output-based allocation program—the American Power Act’s emissions allowance rebate program.

Author(s): Joshua Schneck and Gale Boyd

Published: December 2011

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