Donate Newsletters

Cap and Trade and Consumer Fairness

Sightline supports auctioning permits in carbon cap and trade programs. That’s because handing out free permits allows firms to capture windfall profits at the expense of consumers.

While there are misconceptions about the economics of allocation, real world experience in Europe shows us that free permits equate to windfalls for polluters. And there is agreement among economists that free permits and auctioned permits add up to the same costs for consumers. Sightline prepared this memo to explain why.

Why Free Allocation of Carbon Allowances Means Windfall Profits for Energy Companies at the Expense of Consumers (1259 downloads )

Report contents:

1. Allocation economics: A simple explanation

2. Allocation economics: More detail

3. Windfalls: What Happened in Europe

4. The evidence: A literature review

More from Sightline:

Sightline’s Climate Policy Project

Sightline’s Series on Climate Fairness

Privacy Overview
Sightline Institute

This website uses cookies so that we can provide you with the best user experience possible. Cookie information is stored in your browser and performs functions such as recognizing you when you return to our website and helping our team to understand which sections of the website you find most interesting and useful.

Strictly Necessary Cookies

Strictly Necessary Cookie should be enabled at all times so that we can save your preferences for cookie settings.

If you disable this cookie, we will not be able to save your preferences. This means that every time you visit this website you will need to enable or disable cookies again.

3rd Party Cookies

This website uses Google Analytics to collect anonymous information such as the number of visitors to the site, and the most popular pages.

Keeping this cookie enabled helps us to improve our website.

Additional Cookies

This website uses social media to collect anonymous information such as which platform are our users coming from.

Keeping this cookie enabled helps us better reach our audiences.