Illustrative Compliance Costs by Subsector and by Cap-and-Trade Policy Scenario Assuming No Rebates in 2016

The criteria for determining free allowances may change in future climate policy proposals, including the possibility of not distributing any free allowances to industry. It is also possible (though unlikely based on the current text of the American Power Act (APA)) that the number of free allowances the legislation sets aside would not be adequate to cover the full quantity of emissions obligations for eligible subsectors (see figure).

With no rebates, a majority of subsectors would face compliance costs of 1% to 6% as a value of shipments. Subsectors at greatest risk if no rebates were available include nitrogenous fertilizers, carbon black, alkalies and chlorine, and industrial gas.