http://blog.recycled-energy.com/2008/03/31/carbon-policy-details-part-4/ RED | the new green: thoughts on ways to reduce greenhouse gas emissions Thu, 02 Sep 2010 06:30:36 +0000 hourly 1 http://wordpress.org/?v=3.0.1 http://blog.recycled-energy.com/2008/03/31/carbon-policy-details-part-4/comment-page-1/#comment-1405 Bill E Tue, 09 Dec 2008 02:24:07 +0000 http://h151871wp.setupmyblog.com/?p=15#comment-1405 Seems to me the feds should auction the permits in tranches. You could buy 2009 permits, or 2009,10,11 permits, or 2009-2019 permits. A mix. Naturally, the later permits might be perceived to have more value as there will be fewer sold, to stay within the cap. The tranches could be cut up and sold, traded, etc. You also would not have to sell all of the out-year permits, you could hold some back to auction next year, and arbitrage will drive future prices to match those on the exchanges for those years. Anyone concerned enough to want to lock in permit pricing could do so. One could also take a chance on future spot pricing. Markets will also naturally develop to sell futures, so that you could go out even further. The only problem I see is the speculators could drive wild price swings, as we've seen in oil markets this past year...but the feds could always step in and add supply by selling some of the held back permits, thus dampening speculation. Seems like it would function like any other market. Allocation makes no sense at all, it just rewards those who are the worst polluters. 100% auction is the way to go. Seems to me the feds should auction the permits in tranches. You could buy 2009 permits, or 2009,10,11 permits, or 2009-2019 permits. A mix. Naturally, the later permits might be perceived to have more value as there will be fewer sold, to stay within the cap.
The tranches could be cut up and sold, traded, etc.
You also would not have to sell all of the out-year permits, you could hold some back to auction next year, and arbitrage will drive future prices to match those on the exchanges for those years.
Anyone concerned enough to want to lock in permit pricing could do so. One could also take a chance on future spot pricing.
Markets will also naturally develop to sell futures, so that you could go out even further. The only problem I see is the speculators could drive wild price swings, as we’ve seen in oil markets this past year…but the feds could always step in and add supply by selling some of the held back permits, thus dampening speculation.
Seems like it would function like any other market.
Allocation makes no sense at all, it just rewards those who are the worst polluters. 100% auction is the way to go.

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