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Experimental evidence on the performance of emission trading schemes in the presence of an active secondary market

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  • Chintamani Jog
  • Georgia Kosmopoulou

Abstract

As auction based emission trading schemes (ETS) become more common in addressing climate change, it is of interest to study the effects of bargaining power in resale markets on original as well as post-resale allowance allocations in terms of prices and efficiency. This article provides an experimental study of first price private value asymmetric auctions followed by a -double auction resale market opportunity. We compare the -double auction to other resale regimes with an uneven distribution of market power and contrast initial bids, resale prices and efficiency. Despite the conventional wisdom that full efficiency requires the absence of market power, we find that -double auction resale markets lead to lower efficiency than the monopsony resale regime. The level of efficiency achieved, however, is close to the highest across mechanisms that have differential bargaining power at the resale stage.

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  • Chintamani Jog & Georgia Kosmopoulou, 2014. "Experimental evidence on the performance of emission trading schemes in the presence of an active secondary market," Applied Economics, Taylor & Francis Journals, vol. 46(5), pages 527-538, February.
    • Handle: RePEc:taf:applec:v:46:y:2014:i:5:p:527-538
    DOI: 10.1080/00036846.2013.857128
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    Cited by:

    1. Chen, Chunhua & Jiang, Dequan & Lan, Meng & Li, Weiping & Ye, Ling, 2022. "Does environmental regulation affect labor investment Efficiency?Evidence from a quasi-natural experiment in China," International Review of Economics & Finance, Elsevier, vol. 80(C), pages 82-95.
    2. Chen, Jiandong & Huang, Shasha & Shen, Zhiyang & Song, Malin & Zhu, Zunhong, 2022. "Impact of sulfur dioxide emissions trading pilot scheme on pollution emissions intensity: A study based on the synthetic control method," Energy Policy, Elsevier, vol. 161(C).
    3. Chang, Kai & Zhang, Chao & Chang, Hao, 2016. "Emissions reduction allocation and economic welfare estimation through interregional emissions trading in China: Evidence from efficiency and equity," Energy, Elsevier, vol. 113(C), pages 1125-1135.

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