Daily Score Blog

This is the second in a short series of posts that explain some important but often overlooked policy issues in the Western Climate Initiative. We've written extensively on "allocations" -- the method of distributing the carbon permits to the public through auctions or free distribution -- but there's a related issue often confused with allocations. Called "apportionment," it has important ramifications.

I know, I know, nothing gets the skin tingling like the word "apportionment." But this is a big question for the Western Climate Initiative -- the seven-state-four-province regional cap and trade system. Which states and provinces get to pass out the carbon permits? How many does each get? And who gets the revenue if the permits are auctioned? Ultimately, it's about the money.  Carbon permits have a real cash value, whether they are sold or handed out for free. And we all know that nothing sharpens a negotiation like a pile of money sitting in the middle of the table.

Maybe that's why WCI has so far produced this masterfully crafted position (pdf):

The Partners are working on an apportionment methodology based on Partner and regional emission reduction goals and requirements. The apportionment methodology will address factors such as production and consumption of electricity, projected population growth and economic activity, and other factors. The Partners intend to have a recommended apportionment methodology by Fall 2008. [Section 7]

Say what?

Before I explain what's going on here, I'll put my cards on the table: Sightline believes that state apportionment should be based on protecting consumers and working families -- in short, it should be based on climate fairness. That means figuring out where the price impacts will occur and awarding state apportionments there so that auction revenue can be used to assist families. One way to do that might be to apportion permits among states and provinces in proportion to their spending on carbon-energy. I'll come back to this in a monent, but first I should explain that some of the intuitive answers to apportionment are unfair.

At first blush, it might seem pretty straightforward to figure out the apportionment (sometimes called an "allowance budget").