Fulbright Scholarship Essay Example - Project Overview

Project Proposal

By the fall of 2009, the proposed beginning of this fellowship, the European Union will have accumulated over four years of experience with greenhouse gas emissions reduction under Phases I & 2 of their Emissions Trading System (ETS) I propose to examine allowance allocations, one of the most important aspects of this program and critical for the design of a future greenhouse gas control program in the United States.

I propose to examine the key political-economy-question—how do you allocate the allowances? From a pure economic perspective, this question is irrelevant. It does not matter whether allowances are sold or given away—the scarcity of the allowances will ensure they will have a price that reflects the marginal cost of controlling GHG emissions. However, from a distributional perspective, the allocation of allowances is the question. It is estimated that the value of allowances in the U.S. under a system similar to that of the EU ETX, would be over $100 billion. Clearly, if you are a firm producing greenhouse gases, it matters to you whether you have to buy them or get them for free….The other side of the auction question is what would be done with the revenue raised from an allowance auction? Again, powerful political interests square off over this question. Some say the money should be used to offset the impact of higher fuel costs on the poor. Some say use it to promote R&D in renewable energy and conservation. The coal industry wants it spent on R&D for carbon capture and sequestration (CCS) that will allow the continued use of coal by capturing and storing CO2 emissions underground. It could also be used to reduce other taxes, pay down the debt, fund social security or anything on which the government spends money. There is also the “Christmas Tree” approach of a little something for everyone.

Original Source: CIES.org