## Market and least-cost

Some economists have urged the use of market-based instruments such as emissions trading to address environmental problems instead of prescriptive “command-and-control” regulation. Command and control regulation is criticized for being insensitive to geographical and technological differences, and therefore inefficient.; however, this is not always so, as shown by the WW-II rationing program in the U.S. in which local and regional boards made adjustments for these differences.After an emissions limit has been set by a government political process, individual companies are free to choose how or whether to reduce their emissions. Failure to report emissions and surrender emission permits is often punishable by a further government regulatory mechanism, such as a fine that increases costs of production. Firms will choose the least-cost way to comply with the pollution regulation, which will lead to reductions where the least expensive solutions exist, while allowing emissions that are more expensive to reduce. Under an emissions trading system, each regulated polluter has flexibility to use the most cost-effective combination of buying or selling emission permits, reducing its emissions by installing cleaner technology, or reducing its emissions by reducing production. The most cost-effective strategy depends on the polluter's marginal abatement cost and the market price of permits. In theory, a polluter's decisions should lead to an economically efficient allocation of reductions among polluters, and lower compliance costs for individual firms and for the economy overall, compared to command-and-control mechanisms.

### Pollution markets

An emission license directly confers a right to emit pollutants up to a certain rate. In contrast, a pollution license for a given location confers the right to emit pollutants at a rate which will cause no more than a specified increase at the pollution-level. For concreteness, consider the following model. There are

n\ \ \ {\displaystyle n}\ agents each of which emits\ \ \ \ \ e\ \ i\ \ \ \ \ {\displaystyle e_{i}}\ pollutants.

There are

m\ \ \ {\displaystyle m}\ locations each of which suffers pollution\ \ \ \ \ q\ \ i\ \ \ \ \ {\displaystyle q_{i}}\ .

The pollution is a linear combination of the emissions. The relation between

e\ \ \ {\displaystyle e}\ and\ \ \ \ q\ \ \ {\displaystyle q}\ is given by a diffusion matrix\ \ \ \ H\ \ \ {\displaystyle H}\ , such that:\ \ \ \ q\ =\ H\ ⋅\ e\ \ \ {\displaystyle q=H\cdot e}\ .As an example, consider three countries along a river (as in the fair river sharing setting).

Pollution in the upstream country is determined only by the emission of the upstream country:

q\ \ 1\ \ \ =\ \ e\ \ 1\ \ \ \ \ {\displaystyle q_{1}=e_{1}}\ .

Pollution in the middle country is determined by its own emission and by the emission of country 1:

q\ \ 2\ \ \ =\ \ e\ \ 1\ \ \ +\ \ e\ \ 2\ \ \ \ \ {\displaystyle q_{2}=e_{1}+e_{2}}\ .

Pollution in the downstream country is the sum of all emissions:

q\ \ 3\ \ \ =\ \ e\ \ 1\ \ \ +\ \ e\ \ 2\ \ \ +\ \ e\ \ 3\ \ \ \ \ {\displaystyle q_{3}=e_{1}+e_{2}+e_{3}}\ .So the matrix\ \ \ \ H\ \ \ {\displaystyle H}\ in this case is a triangular matrix of ones.

i\ \ \ {\displaystyle i}\ permits its holder to emit pollutants that will cause at most this level of pollution at location\ \ \ \ i\ \ \ {\displaystyle i}\ . Therefore, a polluter that affects water quality at a number of points has to hold a portfolio of licenses covering all relevant monitoring-points. In the above example, if country 2 wants to emit a unit of pollutant, it should purchase two permits: one for location 2 and one for location 3.

Montgomery shows that, while both markets lead to efficient license allocation, the market in pollution-licenses is more widely applicable than the market in emission-licenses.

## Public opinion

In the United States, most polling shows large support for emissions trading (often referred to as cap-and-trade). This majority support can be seen in polls conducted by Washington Post/ABC News, Zogby International and Yale University. A new Washington Post-ABC poll reveals that majorities of the American people believe in climate change, are concerned about it, are willing to change their lifestyles and pay more to address it, and want the federal government to regulate greenhouse gases. They are, however, ambivalent on cap-and-trade.More than three-quarters of respondents, 77.0%, reported they “strongly support” (51.0%) or “somewhat support” (26.0%) the EPA's decision to regulate carbon emissions. While 68.6% of respondents reported being “very willing” (23.0%) or “somewhat willing” (45.6%), another 26.8% reported being “somewhat unwilling” (8.8%) or “not at all willing” (18.0%) to pay higher prices for “Green” energy sources to support funding for programs that reduce the effect of global warming.According to PolitiFact, it is a misconception that emissions trading is unpopular in the United States because of earlier polls from Zogby International and Rasmussen which misleadingly include “new taxes” in the questions (taxes aren't part of emissions trading) or high energy cost estimates.

## Comparison with other methods of emission reduction

Cap and trade is the textbook emissions trading program. Other market-based approaches include baseline-and-credit, and pollution tax. They all put a price on pollution (for example, see carbon price), and so provide an economic incentive to reduce pollution beginning with the lowest-cost opportunities. By contrast, in a command-and-control approach, a central authority designates pollution levels each facility is allowed to emit. Cap and trade essentially functions as a tax where the tax rate is variable based on the relative cost of abatement per unit, and the tax base is variable based on the amount of abatement needed.

### Baseline and credit

In a baseline and credit program, polluters can create permits, called credits or offsets, by reducing their emissions below a baseline level, which is often the historical emissions level from a designated past year. Such credits can be bought by polluters that have a regulatory limit.

### Command-and-control regulation

Command and control is a system of regulation that prescribes emission limits and compliance methods for each facility or source. It is the traditional approach to reducing air pollution.Command-and-control regulations are more rigid than incentive-based approaches such as pollution fees and cap and trade. An example of this is a performance standard which sets an emissions goal for each polluter that is fixed and, therefore, the burden of reducing pollution cannot be shifted to the firms that can achieve it more cheaply. As a result, performance standards are likely to be more costly overall. The additional costs would be passed to end consumers.

## Economics of international emissions trading

### Kyoto Protocol

In 1990, the first Intergovernmental Panel on Climate Change (IPCC) report highlighted the imminent threat of climate change and greenhouse gas emission, and diplomatic efforts began to find an international framework within which such emissions could be regulated. In 1997 the Kyoto Protocol was adopted. The Kyoto Protocol is a 1997 international treaty that came into force in 2005. In the treaty, most developed nations agreed to legally binding targets for their emissions of the six major greenhouse gases. Emission quotas (known as “Assigned amounts”) were agreed by each participating 'Annex I' country, with the intention of reducing the overall emissions by 5.2% from their 1990 levels by the end of 2012. Between 1990 and 2012 the original Kyoto Protocol parties reduced their CO2 emissions by 12.5%, which is well beyond the 2012 target of 4.7%. The United States is the only industrialized nation under Annex I that has not ratified the treaty, and is therefore not bound by it. The IPCC has projected that the financial effect of compliance through trading within the Kyoto commitment period will be limited at between 0.1-1.1% of GDP among trading countries. The agreement was intended to result in industrialized countries' emissions declining in aggregate by 5.2 percent below 1990 levels by the year of 2012. Despite the failure of the United States and Australia to ratify the protocol, the agreement became effective in 2005, once the requirement that 55 Annex I (predominantly industrialized) countries, jointly accounting for 55 percent of 1990 Annex I emissions, ratify the agreement was met.The Protocol defines several mechanisms (“flexible mechanisms”) that are designed to allow Annex I countries to meet their emission reduction commitments (caps) with reduced economic impact.Under Article 3.3 of the Kyoto Protocol, Annex I Parties may use GHG removals, from afforestation and reforestation (forest sinks) and deforestation (sources) since 1990, to meet their emission reduction commitments.Annex I Parties may also use International Emissions Trading (IET). Under the treaty, for the 5-year compliance period from 2008 until 2012, nations that emit less than their quota will be able to sell assigned amount units (each AAU representing an allowance to emit one metric tonne of CO2) to nations that exceed their quotas. It is also possible for Annex I countries to sponsor carbon projects that reduce greenhouse gas emissions in other countries. These projects generate tradable carbon credits that can be used by Annex I countries in meeting their caps. The project-based Kyoto Mechanisms are the Clean Development Mechanism (CDM) and Joint Implementation (JI). There are four such international flexible mechanisms, or Kyoto Mechanism, written in the Kyoto Protocol. Article 17 if the Protocol authorizes Annex 1 countries that have agreed to the emissions limitations to take part in emissions trading with other Annex 1 Countries. Article 4 authorizes such parties to implement their limitations jointly, as the member states of the EU have chosen to do. Article 6 provides that such Annex 1 countries may take part in joint initiatives (JIs) in return for emissions reduction units (ERUs) to be used against their Assigned Amounts. Art 12 provides for a mechanism known as the clean development mechanism (CDM), under which Annex 1 countries may invest in emissions limitation projects in developing countries and use certified emissions reductions (CERs) generated against their own Assigned Amounts.The CDM covers projects taking place in non-Annex I countries, while JI covers projects taking place in Annex I countries. CDM projects are supposed to contribute to sustainable development in developing countries, and also generate “real” and “additional” emission savings, i.e., savings that only occur thanks to the CDM project in question (Carbon Trust, 2009, p. 14). Whether or not these emission savings are genuine is, however, difficult to prove (World Bank, 2010, pp. 265–267).

### Australia

In 2003 the New South Wales (NSW) state government unilaterally established the NSW Greenhouse Gas Abatement Scheme to reduce emissions by requiring electricity generators and large consumers to purchase NSW Greenhouse Abatement Certificates (NGACs). This has prompted the rollout of free energy-efficient compact fluorescent lightbulbs and other energy-efficiency measures, funded by the credits. This scheme has been criticised by the Centre for Energy and Environmental Markets (CEEM) of the UNSW because of its lack of effectiveness in reducing emissions, its lack of transparency and its lack of verification of the additionality of emission reductions.Both the incumbent Howard Coalition government and the Rudd Labor opposition promised to implement an emissions trading scheme (ETS) before the 2007 federal election. Labor won the election, with the new government proceeding to implement an ETS. The government introduced the Carbon Pollution Reduction Scheme, which the Liberals supported with Malcolm Turnbull as leader. Tony Abbott questioned an ETS, saying the best way to reduce emissions is with a “simple tax”. Shortly before the carbon vote, Abbott defeated Turnbull in a leadership challenge, and from there on the Liberals opposed the ETS. This left the government unable to secure passage of the bill and it was subsequently withdrawn. Julia Gillard defeated Rudd in a leadership challenge and promised not to introduce a carbon tax, but would look to legislate a price on carbon when taking the government to the 2010 election. In the first hung parliament result in 70 years, the government required the support of crossbenchers including the Greens. One requirement for Greens support was a carbon price, which Gillard proceeded with in forming a minority government. A fixed carbon price would proceed to a floating-price ETS within a few years under the plan. The fixed price lent itself to characterisation as a carbon tax and when the government proposed the Clean Energy Bill in February 2011, the opposition claimed it to be a broken election promise.The bill was passed by the Lower House in October 2011 and the Upper House in November 2011. The Liberal Party vowed to overturn the bill if elected. The bill thus resulted in passage of the Clean Energy Act, which possessed a great deal of flexibility in its design and uncertainty over its future. The Liberal/National coalition government elected in September 2013 has promised to reverse the climate legislation of the previous government. In July 2014, the carbon tax was repealed as well as the Emissions Trading Scheme (ETS) that was to start in 2015.

### New Zealand

In 2003, New York State proposed and attained commitments from nine Northeast states to form a cap-and-trade carbon dioxide emissions program for power generators, called the Regional Greenhouse Gas Initiative (RGGI). This program launched on January 1, 2009 with the aim to reduce the carbon “budget” of each state's electricity generation sector to 10% below their 2009 allowances by 2018.Also in 2003, U.S. corporations were able to trade CO2 emission allowances on the Chicago Climate Exchange under a voluntary scheme. In August 2007, the Exchange announced a mechanism to create emission offsets for projects within the United States that cleanly destroy ozone-depleting substances.In 2006, the California Legislature passed the California Global Warming Solutions Act, AB-32, which was signed into law by Governor Arnold Schwarzenegger. Thus far, flexible mechanisms in the form of project based offsets have been suggested for three main project types. The project types include: manure management, forestry, and destruction of ozone-depleted substances. However, a ruling from Judge Ernest H. Goldsmith of San Francisco's Superior Court stated that the rules governing California's cap-and-trade system were adopted without a proper analysis of alternative methods to reduce greenhouse gas emissions. The tentative ruling, issued on 24 January 2011, argued that the California Air Resources Board violated state environmental law by failing to consider such alternatives. If the decision is made final, the state would not be allowed to implement its proposed cap-and-trade system until the California Air Resources Board fully complies with the California Environmental Quality Act. California's cap-and-trade program ranks only second to the ETS (European Trading System) carbon market in the world. In 2012, under the auction, the reserve price, which is the price per ton of CO2 permit is \$10. Some of the emitters obtain allowances for free, which is for the electric utilities, industrial facilities and natural gas distributors, whereas some of the others have to go to the auction.In 2014, the Texas legislature approved a 10% reduction for the Highly Reactive Volatile Organic Compound (HRVOC) emission limit. This was followed by a 5% reduction for each subsequent year until a total of 25% percent reduction was achieved in 2017.In February 2007, five U.S. states and four Canadian provinces joined together to create the Western Climate Initiative (WCI), a regional greenhouse gas emissions trading system. In July 2010, a meeting took place to further outline the cap-and-trade system. In November 2011, Arizona, Montana, New Mexico, Oregon, Utah and Washington withdrew from the WCI.In 1997, the State of Illinois adopted a trading program for volatile organic compounds in most of the Chicago area, called the Emissions Reduction Market System. Beginning in 2000, over 100 major sources of pollution in eight Illinois counties began trading pollution credits. ### South Korea South Korea's national emissions trading scheme officially launched on 1 January 2015, covering 525 entities from 23 sectors. With a three-year cap of 1.8687 billion tCO2e, it now forms the second largest carbon market in the world following the EU ETS. This amounts to roughly two-thirds of the country's emissions. The Korean emissions trading scheme is part of the Republic of Korea's efforts to reduce greenhouse gas emissions by 30% compared to the business-as-usual scenario by 2020. ### China #### Pollution Permit Trading In an effort to reverse the adverse consequences of air pollution, in 2006, China started to consider a national pollution permit trading system in order to use market-based mechanisms to incentivize companies to cut pollution. This has been based on a previous pilot project called the Industrial SO2 emission trading pilot scheme, which was launched in 2002. Four provinces, three municipalities and one business entity was involved in this pilot project (also known as the 4+3+1 project). They are Shandong, Shanxi, Jiangsu, Henan, Shanghai, Tianjin, Liuzhou and China Huaneng Group, a state-owned company in the power industry. This pilot project did not turn into a bigger scale inter-provincial trading system, but it stimulated numerous local trading platforms.In 2014, when the Chinese government started considering a national level pollution permit trading system again, there were more than 20 local pollution permit trading platforms. The Yangtze River Delta region as a whole has also run test trading, but the scale was limited. In the same year, the Chinese government proposed establishing a carbon market, focused on CO2 reduction later in the decade, and it is a separate system from the pollution permit trading. #### Carbon Market China currently emits about 30% of global emission, and it became the largest emitter in the world. When the market launched, it will be the largest carbon market in the world. The initial design of the system targets a scope of 3.5 billion tons of carbon dioxide emissions that come from 1700 installations. It has made a voluntary pledge under the UNFCCC to lower CO2 per unit of GDP by 40 to 45% in 2020 when comparing to the 2005 levels.In November 2011, China approved pilot tests of carbon trading in seven provinces and cities – Beijing, Chongqing, Shanghai, Shenzhen, Tianjin as well as Guangdong Province and Hubei Province, with different prices in each region. The pilot is intended to test the waters and provide valuable lessons for the design of a national system in the near future. Their successes or failures will, therefore, have far-reaching implications for carbon market development in China in terms of trust in a national carbon trading market. Some of the pilot regions can start trading as early as 2013/2014. National trading is expected to start in 2017, latest in 2020. The effort to start a national trading system has faced some problems that took longer than expected to solve, mainly in the complicated process of initial data collection to determine the base level of pollution emission. According to the initial design, there will be eight sectors that are first included in the trading system, chemicals, petrochemicals, iron and steel, non-ferrous metals, building materials, paper, power and aviation, but many of the companies involved lacked consistent data. Therefore, by the end of 2017, the allocation of emission quotas have started but it has been limited to only the power sector and will gradually expand, although the operation of the market is yet to begin. In this system, Companies that are involved will be asked to meet target level of reduction and the level will contract gradually. ### India Trading is set to begin in 2014 after a three-year rollout period. It is a mandatory energy efficiency trading scheme covering eight sectors responsible for 54 per cent of India's industrial energy consumption. India has pledged a 20 to 25 per cent reduction in emissions intensity from 2005 levels by 2020. Under the scheme, annual efficiency targets will be allocated to firms. Tradable energy-saving permits will be issued depending on the amount of energy saved during a target year. #### Renewable energy certificates Renewable Energy Certificates (occasionally referred to as or “green tags” [citation required]), are a largely unrelated form of market-based instruments that are used to achieve renewable energy targets, which may be environmentally motivated (like emissions reduction targets), but may also be motivated by other aims, such as energy security or industrial policy. ## Carbon market Carbon emissions trading is emissions trading specifically for carbon dioxide (calculated in tonnes of carbon dioxide equivalent or tCO2e) and currently makes up the bulk of emissions trading. It is one of the ways countries can meet their obligations under the Kyoto Protocol to reduce carbon emissions and thereby mitigate global warming. ### Market trend Trading can be done directly between buyers and sellers, through several organised exchanges or through the many intermediaries active in the carbon market. The price of allowances is determined by supply and demand. As many as 40 million allowances have been traded per day. In 2012, 7.9 billion allowances were traded with a total value of €56 billion. Carbon emissions trading declined in 2013, and is expected to decline in 2014.According to the World Bank's Carbon Finance Unit, 374 million metric tonnes of carbon dioxide equivalent (tCO2e) were exchanged through projects in 2005, a 240% increase relative to 2004 (110 mtCO2e) which was itself a 41% increase relative to 2003 (78 mtCO2e).Global carbon markets have shrunk in value by 60% since 2011, but are expected to rise again in 2014.In terms of dollars, the World Bank has estimated that the size of the carbon market was US\$11 billion in 2005, \$30 billion in 2006, and \$64 billion in 2007.The Marrakesh Accords of the Kyoto protocol defined the international trading mechanisms and registries needed to support trading between countries (sources can buy or sell allowances on the open market. Because the total number of allowances is limited by the cap, emission reductions are assured.). Allowance trading now occurs between European countries and Asian countries. However, while the US as a nation did not ratify the protocol, many of its states are developing cap-and-trade systems and considering ways to link them together, nationally and internationally, to find the lowest costs and improve liquidity of the market. However, these states also wish to preserve their individual integrity and unique features. For example, in contrast to other Kyoto-compliant systems, some states propose other types of greenhouse gas sources, different measurement methods, setting a maximum on the price of allowances, or restricting access to CDM projects. Creating instruments that are not fungible (exchangeable) could introduce instability and make pricing difficult. Various proposals for linking these systems across markets are being investigated, and this is being coordinated by the International Carbon Action Partnership (ICAP).

In 2008, Barclays Capital predicted that the new carbon market would be worth \$70 billion worldwide that year. The voluntary offset market, by comparison, is projected to grow to about \$4bn by 2010.23 multinational corporations came together in the G8 Climate Change Roundtable, a business group formed at the January 2005 World Economic Forum. The group included Ford, Toyota, British Airways, BP and Unilever. On June 9, 2005 the Group published a statement stating the need to act on climate change and stressing the importance of market-based solutions. It called on governments to establish “clear, transparent, and consistent price signals” through “creation of a long-term policy framework” that would include all major producers of greenhouse gases. By December 2007, this had grown to encompass 150 global businesses.Business in the UK have come out strongly in support of emissions trading as a key tool to mitigate climate change, supported by NGOs. However, not all businesses favor a trading approach. On December 11, 2008, Rex Tillerson, the CEO of Exxonmobil, said a carbon tax is “a more direct, more transparent and more effective approach” than a cap-and-trade program, which he said, “inevitably introduces unnecessary cost and complexity”. He also said that he hoped that the revenues from a carbon tax would be used to lower other taxes so as to be revenue neutral.The International Air Transport Association, whose 230 member airlines comprise 93% of all international traffic, position is that trading should be based on “benchmarking”, setting emissions levels based on industry averages, rather than “grandfathering”, which would use individual companies’ previous emissions levels to set their future permit allowances. They argue grandfathering “would penalise airlines that took early action to modernise their fleets, while a benchmarking approach, if designed properly, would reward more efficient operations”.

## Measuring, reporting, verification

Assuring compliance with an emissions trading scheme requires measuring, reporting and verification (MRV). Measurements are needed at each operator or installation. These measurements are reported to a regulator. For greenhouse gases, all trading countries maintain an inventory of emissions at national and installation level; in addition, trading groups within North America maintain inventories at the state level through The Climate Registry. For trading between regions, these inventories must be consistent, with equivalent units and measurement techniques.In some industrial processes, emissions can be physically measured by inserting sensors and flowmeters in chimneys and stacks, but many types of activity rely on theoretical calculations instead of measurement. Depending on local legislation, measurements may require additional checks and verification by government or third party auditors, prior or post submission to the local regulator.

## Enforcement

In contrast to an ordinary market, in a pollution market the amount purchased is not necessarily the amount 'consumed' (= the amount of pollution emitted). A firm might buy a small amount of allowances but emit a much larger amount of pollution. This creates a troublesome moral hazard problem. This problem may be solved by a centralized regulator. The regulator should perform Measuring, Reporting and Verification (MRV) of the actual pollution levels, and enforce the allowances. Without effective MRV and enforcement, the value of allowances diminishes. Enforcement methods include fines and sanctions for polluters that have exceeded their allowances. Concerns include the cost of MRV and enforcement, and the risk that facilities may lie about actual emissions. The net effect of a corrupt reporting system or poorly managed or financed regulator may be a discount on emission costs, and a hidden increase in actual emissions. According to Nordhaus, strict enforcement of the Kyoto Protocol is likely to be observed in those countries and industries covered by the EU ETS. Ellerman and Buchner commented on the European Commission's (EC's) role in enforcing scarcity of permits within the EU ETS. This was done by the EC's reviewing the total number of permits that member states proposed that their industries be allocated. Based on institutional and enforcement considerations, Kruger et al. suggested that emissions trading within developing countries might not be a realistic goal in the near-term. Burniaux et al. argued that due to the difficulty in enforcing international rules against sovereign states, development of the carbon market would require negotiation and consensus-building.An alternative to centralized regulation is distributed regulation, in which the firms themselves are induced to inspect the other firms and report their misbehavior. It is possible to implement such systems in subgame perfect equilibrium. Moore and Repullo present an implementation with unbounded fines; Kahana and Mealem and Nitzan present an implementation with bounded fines. Their work extends the work of Duggan and Roberts by adding a second component which takes care of the moral hazard.

## Criticism

### Offsets

Forest campaigner Jutta Kill (2006) of European environmental group FERN argued that offsets for emission reductions were not substitute for actual cuts in emissions. Kill stated that “[carbon] in trees is temporary: Trees can easily release carbon into the atmosphere through fire, disease, climatic changes, natural decay and timber harvesting.”

### Permit supply level

Regulatory agencies run the risk of issuing too many emission credits, which can result in a very low price on emission permits. This reduces the incentive that permit-liable firms have to cut back their emissions. On the other hand, issuing too few permits can result in an excessively high permit price. This an argument for a hybrid instrument having a price-floor, i.e., a minimum permit price, and a price-ceiling, i.e., a limit on the permit price. However, a price-ceiling (safety value) removes the certainty of a particular quantity limit of emissions.

### Permit allocation versus auctioning

If polluters receive emission permits for free (“grandfathering”), this may be a reason for them not to cut their emissions because if they do they will receive fewer permits in the future.This perverse incentive can be alleviated if permits are auctioned, i.e., sold to polluters, rather than giving them the permits for free. Auctioning is a method for distributing emission allowances in a cap-and-trade system whereby allowances are sold to the highest bidder. Revenues from auctioning go to the government and can be used for development of sustainable technology or to cut distortionary taxes, thus improving the efficiency of the overall cap policy.On the other hand, allocating permits can be used as a measure to protect domestic firms who are internationally exposed to competition. This happens when domestic firms compete against other firms that are not subject to the same regulation. This argument in favor of allocation of permits has been used in the EU ETS, where industries that have been judged to be internationally exposed, e.g., cement and steel production, have been given permits for free).This method of distribution may be combined with other forms of allowance distribution.

### Distributional effects

The US Congressional Budget Office (CBO, 2009) examined the potential effects of the American Clean Energy and Security Act on US households. This act relies heavily on the free allocation of permits. The Bill was found to protect low-income consumers, but it was recommended that the Bill be made more efficient by reducing welfare provisions for corporations, and more resources be made available for consumer relief.