Here is a brief analysis of the allowances allocated to states and energy consumers under the “Waxman-Markey” American Clean Energy and Security Act, or H.R. 2454. This analysis was developed jointly by WRI and the Georgetown State-Federal Climate Resources Center.
This analysis seeks to answer two important questions about allowance distribution under H.R. 2454, the American Clean Energy and Security Act (ACESA):
In particular, this analysis focuses on allocations to states and local distribution companies (LDCs) for public benefit purposes such as assistance to energy consumers, investments in energy efficiency and renewable energy, and adaptation to climate change.
ACESA limits total greenhouse gas (GHG) emissions. It requires regulated entities that emit such gases to hold allowances (permits). Each allowance permits the holder to emit one ton of GHGs. Allowances have value and can be sold.
ACESA distributes some allowances for free and auctions others. The majority are distributed for free to state and federal agencies and other entities with conditions on their use; a smaller, declining portion of allowances is distributed without restrictions to emitters and energy-intensive businesses. The amount of allowances distributed to various purposes changes over time as the cap is reduced and as distribution formulas change.
For more in-depth discussion, download the complete analysis .