1
Allowance
Allocation:
many
allocation
options
and
combinations
°
Auction
or
free
°
Permanent
or
updated
°
Coal
or
Fossil
units
only,
or
all
electricity
generators
including
renewables,
nuclear
°
Input­,
output­,
or
emission
reduction­
based
°
Hybrids
Allocation
Mechanism
1.
Free
vs.
Auction
Free
Auction
2.
Updated
vs.
Permanent
Updated
Permanent
3.
Recipients
Fossil
All
Fossil
All
(
Hybrid)

4.
Basis
Input
Output
Output
Input
Emission
Reduction
Output
Output
1/
2
Perm/
All/
Out
5.
Options
Analyzed
Up/
Fos/
In
Up/
Fos/
Out
Up/
All/
Out
Perm/
Fos/
In
Perm/
Fos/
ER
Perm/
Fos/
Out
Perm/
All/
Out
1/
2
Auction
Auction
 
New
units
can
be
treated
differently
in
permanent
allocations
 
Non­
emitters
can
receive
allocations
2
Allowance
Allocations­

Example
Approach
"
Modified
Output"
allocation
method
:

 
Input­
based
allocations
for
existing
fossil
units
with
updating
to
take
into
account
new
generation
on
a
"
modified
output"
basis.

 
Demonstrates
one
possible
approach
that
incorporates
new
generation
and
is
administratively
straightforward.
3
Modified
Output
Approach
(
overview)

°
New
unit
"
modified
output"
added
to
the
original
existing
unit
heat
input.
Allocations
made
to
units
in
proportion
to
their
share
of
updated
and
initial
heat
input.

 
Alternately,
existing
unit
heat
input
may
be
adjusted
with
a
ratio
to
account
for
different
fuel­
type
use.

°
Initial
allocation
made
for
first
five
years
of
program.
Afterwards,

annual
updating
determines
allocations
for
the
year
six
years
in
advance.

°
Heat
input
calculations
for
ALL
new
generating
units:
output
multiplied
by
8000
btu/
kWh
(
cogen
units
also
take
into
account
steam
output)

 
Creates
level
output­
based
benefits
for
new
units
and
provides
incentives
for
efficiency.

 
This
approach
would
require
new
sources
to
report
output
data.

 
Alternately,
can
only
include
new
fossil
units.
4
Modified
Output
Approach
(
overview)

°
New
units
pick
up
allowances
relative
to
their
generation,
and
existing
plants'
allocations
slowly
decline
with
their
share
of
total
heat
input.

°
To
avoid
a
generation
subsidy,
existing
units
would
not
update
their
heat
input
numbers
and
new
units
would
update
only
once,

when
they
begin
generating.

 
Alternately,
can
have
new
units
regularly
update
their
output.

°
A
new
source
set­
aside
would
be
established
for
units
that
have
entered
service
but
have
not
yet
been
allocated
allowances
through
the
updating
mechanism.

°
New
fossil
units
could
be
allocated
allowances
relative
to
their
NSPS
rates
until
they
have
established
a
baseline
of
output
data
and
have
been
included
in
the
updating
mechanism.

 
In
the
interim,
new
non­
emitting
units
could
be
allocated
allowances
at
the
lowest
fossil
fuel
NSPS
rate.
