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The Evolution of Pollution Auctions

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  • Ian A. MacKenzie

Abstract

This article traces the evolution of pollution auctions. The article examines how auction design began with an initially simple auction format and has progressed over time, focusing on auctions in three key pollution regulation programs: the EU Emissions Trading Scheme, the US Regional Greenhouse Gas Initiative, and the California Cap-and-Trade Program. In response to the unique characteristics of pollution regulation, which is aimed at achieving both cost containment and market participation, regulators have created novel and interesting auction designs. The article reviews the theoretical and experimental evidence concerning the outcomes of current auction programs and highlights unique design features of these regulatory systems that are fundamental to both their development and success. A key finding of the article is that even small changes in auction design can lead to significant differences in auction outcomes.

Suggested Citation

  • Ian A. MacKenzie, 2022. "The Evolution of Pollution Auctions," Review of Environmental Economics and Policy, University of Chicago Press, vol. 16(1), pages 1-24.
    • Handle: RePEc:ucp:renvpo:doi:10.1086/717898
    DOI: 10.1086/717898
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    Cited by:

    1. Alex Dickson & Ian A. MacKenzie, 2022. "Permit Markets with Political and Market Distortions," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 82(1), pages 227-255, May.
    2. Friesen, Lana & Gangadharan, Lata & Khezr, Peyman & MacKenzie, Ian A., 2022. "Mind your Ps and Qs! Variable allowance supply in the US Regional Greenhouse Gas Initiative," Journal of Environmental Economics and Management, Elsevier, vol. 112(C).
    3. Timothy N. Cason & John K. Stranlund & Frans P. de Vries, 2022. "Investment Incentives in Tradable Emissions Markets with Price Floors Approach," Purdue University Economics Working Papers 1331, Purdue University, Department of Economics.

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