Messing around with cap and trade

And for Friday, because I'm full of turkey and it's a holiday weekend, a quick and totally speculative post that I've been thinking about for a bit.

Cap-and-trade programs as proposed in the US appear to me to generally operate through a centralized allowance distribution model. So for instance, in the case of SO2, initial allowances were as I understand it distributed by the EPA (with some hands-on fiddling and extra-allowance-granting by legislators). Waxman-Markey as far as I can tell had the same model - determination and distribution of allowances by the EPA.

What I've been wondering this week is whether a more distributed model would be more politically viable. What if, instead of the EPA allocating allowances directly to companies, it allocated allowances to communities, allowing those communities to auction off allowances to the companies, and local governments to keep the proceeds?

I don't have a good sense of how local governments work in a general sense, or what the legal relationship between federal and local government is and whether existing political arrangements would, from a practical point of view, allow such a system. I'm also pretty sure such a system would not be as efficient or effective a process as having the EPA do it - best-case, it would probably be bureaucratically unwieldy and allow each individual community to make individual, stupid decisions about allocation - which some of them might indeed do. Still, the classic version of CO2 cap-and-trade died an ignominious death, largely because its defenders couldn't articulate to voters what immediate, tangible benefits it will give them to balance out potential costs. Giving local governments allowances to allocate and/or auction off themselves would be one way of putting skin in the game at a community level, of making the proceeds from an auction system tangible to voters, and of giving communities a sense that climate action is something they have some on-going control of and ability to shape to their individual community's needs.