Allocation process

Material transformations in connection with resource allocations (process orders, concretizations of master recipes with specific quantities, timing and allocation information). 

Block, Z. Sc MacMillan, I. 1993. Corporate venturing creating new businesses within the firm. In J. Bower (ed.). Managing the Resource Allocation Process. Boston Harvard Business School Press. 

Bower, J. (ed.) 1970. Managing the Resource Allocation Process. Boston Harvard Business School Press. 

The third reason why cost budgets are padded is that budgetary cost projections are often cut by others in the resource-allocation process. Thus the process of preparing budgets can result in a vicious cycle. Budgetary projections are padded because they will likely be cut, and they are cut because they are likely to have been padded. 

The final traditional area of dispute concerns administrative costs. The phase I national allocation plans (NAPs) involved negotiation over allowances with a total asset value of almost 50 billion per year (assuming an average price of 20/tCO2). Political decisions on how to allocate these assets between sectors and individual installations naturally creates intensive lobby activity by all participants in order to obtain the maximum possible share of the rents.21 The time and energy devoted by companies, governments, and indeed consultancy and research sectors, to this enormous rent allocation process represents huge transactional costs.22... 

All test animals, from acute to chronic and carcinogenicity studies, should randomly be attributed to the test group. Randomization avoids influences of the selection process of the animals during the allocation process. Random tables exist in computer programs designed for toxicity studies. No in vivo study should be conducted without attributing animals to groups by means other than random events. Otherwise the study is severely compromised. 

Consider, finally, the use of race as a criterion of allocating kidneys for transplantation.119 Three facts conspire to make American blacks bad ly placed in this allocative process. First, they are overrepresented as patients, partly because of the hypertensive problems mentioned... 

After these first two prominent countries in the European allocation process, we turn to a set of three smaller countries, two of which, Denmark and Sweden, like the UK, have some experience with emissions trading and governments strongly supportive of climate policy, and a third, Ireland, the government of which was committed to being an early mover in part because Ireland held the presidency of the EU Council in the first half of 2004 when the NAPs were due to be submitted. 

In this chapter we look at the first allocation round from the European perspective. We do this by outlining the allocation process and rules (Section 2), discussing the challenges faced in developing the first allocation plans (Section 3), describing the role of Commission guidance (Section 4) and reviewing the Commission s assessment of plans (Section 5). In Section 6 we describe the key factors that influenced and shaped the first round allocation process, followed by conclusions in the final section. 

Article 11(1) regulates the allocation process following the approval of the plan by the Commission. It foresees the implementation of the plan by taking a final national allocation decision at least three months before the beginning of the first trading period. 

The challenges discussed so far are predominantly of a technical nature. The EU greenhouse gas emission trading scheme is the first application of this environmental policy instrument at EU level and few Member States had previously implemented or considered the use of the instrument at national level.10 Therefore neither authorities charged with the task to develop the allocation plan nor stakeholders involved had much experience with an allocation process.11 This relative inexperience made the process design (see next point) even more challenging. In many cases know-how gaps had to be addressed as a first step towards... 

As elaborated above the establishment of the first allocation plan is complex both in terms of technical and process issues. An additional factor that characterised the first allocation process was the very tight time schedule. The Directive was politically agreed in July 2003 and formally entered into force on 25 October 2003. This means that the first allocation plans were due less than six months after the formal entry into force of the Directive. 

Because of these many challenges the allocation process embodied the Commission took an active role in the run-up to the allocation process to assist and guide Member States. Prior to the adoption of the... 

Directive the Commission had conducted and published two studies (Harrison and Radov 2002, as well as PriceWaterhouseCoopers and ECN 2003) that not only supported the negotiation on the allocation process and rules, but also offered assistance in the implementation process. Harrison and Radov have inter alia synthesised the allocation rules in all pre-existing cap-and-trade schemes. 

The first allocation of allowances in the context of the introduction of the EU greenhouse gas emission trading scheme created an economic asset in the European economy with an annual value of some 22 to 44 billion.19 Hence another way of looking at the allocation process is through the lens of distributing an economic asset of that... 

The only certain factor at this stage is that a second allocation round will take place with notification of allocations plans to the Commission by 30 June 2006. Beyond the second allocation round many options are possible. As part of the review of the Directive launched in mid-2006 the legal framework may be changed substantially. So one will have to see to what extent the periodic and decentralised nature of the allocation process will exist beyond 2012. One thing is for sure however that the allocation of allowances in the EU greenhouse gas emission trading scheme will continue to stimulate a lot of debate and deliver rich material for books like this one. 

Table 4.3 Results of the German allocation process compared to planned data... 

The actual availability of data for the allocation process was extremely unclear for a long time. For this reason an iterative and very pragmatic approach had to be ultimately pursued as a result, a considerable degree of uncertainty could not be avoided. 

The theoretical approach that an aggregate emission ceiling should be determined first, followed by the allocation of allowances to the plants, has only been sketchily implemented in reality. Finally, the ratio between the allocation to individual installations and their historical or expected emissions formed the decisive indicator, towards which the decision-making processes were orientated. Thus, the increase of the emissions ceilings in reality perfectly correlated to the parameters with which additional allocation situations were compensated in their allocation effect. Even if the degree of freedom for such adaptations in the Kyoto period were to be reduced, an early fixing of the cap remains a central challenge for future allocation processes. 

During the allocation process, it was argued that some kind of benchmarking allocation (allocation per unit of output) would be fair - in the sense that it would automatically take into account early action and... 

An important factor that influenced the allocation process in Denmark was the desire to create simple, transparent allocation rules. The fewer special provisions, the fewer cases of operators claiming special circumstances and extra allocations. The two formulae above are in fact very simple and transparent, and the use of the formulae in practice has resulted in only two formal complaints over allocation16. It is worth noting that simplicity has been kept throughout in the sense that allocation to installations ... 

Other comments on the allocation process 6.1 Alternative methods of allocation... 

In Sweden, there has been a lot of attention on the allocation process rather than on the effects of the emission trading system itself. Some companies argue that if C02-efficient companies are not rewarded in the allocation there will be no incentives for abatement. I do not agree with them. It is true that allocation can be a very important revenue. For new entrants, the value of the allocation can be comparable to the annual cost for the investment (Ahman and Holmgren 2006). But the incentives for abatement are created from the cost for carbon emissions and not from the individual allocation. One can ask whether this is what companies really believe or whether they were just making noise in order to increase their allocation. 

---