Valuing Renewable Energy in Emerging U.S. Carbon Markets

The current input-based allocation system proposed for the Regional Greenhouse Gas Initiative in the Northeast prevents renewable energy from contributing to emissions reductions within the market. A scheme where allowances are set aside for current and future voluntary green power sales and retired by customers when they are purchased would allow additional reductions to be made. Whichever allocation scheme is chosen, though, should be implemented in both emerging U.S. markets to decrease problems of allowance fungibility and reduce transaction costs associated with allowance tracking.