Economic Effects of RGGI How Selling Allowances Affects Consumer
Prices In other pollution reduction programs, power companies
are given the allowances for free, the companies then pass
through the "market value" of these allowances in their bills to
consumers. This means that the cost of electricity to consumers
will include as much of the cost of allowances as the law
permits generators to add on, whether those allowances are
purchased or obtained free of charge. Selling the allowances
ensures that their proceeds will benefit the public by funding
projects to conserve energy, reduce CO2 emissions and develop
clean technologies. The decision to sell allowances takes into
account the European Union's experience. The E.U. gave away 90
percent of its allowances, thinking that would ease industry's
compliance cost. However, that mechanism resulted in companies
enjoying a windfall; power costs to customers increased to cover
the cost of the allowances, but generators did not pay for the
allowances. In the U.K. al