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Auctioning greenhouse gas emissions permits in Australia

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  • Regina Betz

    ()

  • Stefan Seifert

    (University of Karlsruhe, Germany)

  • Peter Cramton

    (University of Maryland, USA)

  • Suzi Kerr

    (Moto Research and Public Policy, New Zealand)

Abstract

Allocating permits based on individual historical emissions (‘grandfathering’), or industry benchmark data, is an important design aspect of an emissions trading scheme. Free permit allocation has proven complex and inefficient (particularly in the European Union) with distribution implications also politically difficult to justify. For these reasons, auctioning emissions permits has become more popular than allocating permits. The European Union is now moving towards auctioning more than 50 per cent of all permits in 2013. In the US, the Regional Greenhouse Gas Initiative (RGGI) has started with auctioning 100 per cent of permits. The Australian proposal for a Carbon Pollution Reduction Scheme (CPRS) also provides for auctioning a significant share of total permits. This report discusses important theoretical and practical auction design aspects for allocating emissions permits in Australia. Particularly interesting is the proposal to simultaneously auction multiple emissions units of different vintages. The specific design details proposed have been adopted by the Australian Government in their CPRS White Paper.

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Bibliographic Info

Paper provided by Environmental Economics Research Hub, Crawford School of Public Policy, The Australian National University in its series Environmental Economics Research Hub Research Reports with number 0929.

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Date of creation: May 2009
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Handle: RePEc:een:eenhrr:0929

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Keywords: Climate policy; Greenhouse gases; Auctions; Emissions trading;

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  1. Alejandro Manelli & Martin Sefton & Benjamin Wilner, . "Multi-Unit Auctions: A Comparison of Static and Dynamic Mechanisms," Working Papers 2132867, Department of Economics, W. P. Carey School of Business, Arizona State University.
  2. Frank Jotzo & Regina Betz, 2009. "Linking the Australian Emissions Trading Scheme," Environmental Economics Research Hub Research Reports 0914, Environmental Economics Research Hub, Crawford School of Public Policy, The Australian National University.
  3. Robert W. Hahn, 2009. "Greenhouse Gas Auctions and Taxes: Some Political Economy Considerations," Review of Environmental Economics and Policy, Association of Environmental and Resource Economists, vol. 3(2), pages 167-188, Summer.
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  6. Lawrence M. Ausubel & Peter Cramton, 2004. "Auctioning Many Divisible Goods," Papers of Peter Cramton 04jeea, University of Maryland, Department of Economics - Peter Cramton, revised 2004.
  7. Cramton, Peter & Kerr, Suzi, 2002. "Tradeable carbon permit auctions: How and why to auction not grandfather," Energy Policy, Elsevier, vol. 30(4), pages 333-345, March.
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  12. Lawrence M. Ausubel & Peter Cramton & Emel Filiz-Ozbay & Nathaniel Higgins & Erkut Ozbay & Andrew Stocking, 2009. "Common-Value Auctions with Liquidity Needs: An Experimental Test of a Troubled Assets Reverse Auction," Papers of Peter Cramton 09cvawln, University of Maryland, Department of Economics - Peter Cramton, revised 2012.
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Cited by:
  1. David McAdams & Giuseppe Lopomo & Leslie Marx & Brian Murray, . "Carbon Allowance Auction Design: An Assessment of Options for the U.S," Working Papers 10-64, Duke University, Department of Economics.
  2. Giuseppe Lopomo & Leslie M. Marx & David McAdams & Brian Murray, 2011. "Carbon Allowance Auction Design: An Assessment of Options for the United States," Review of Environmental Economics and Policy, Association of Environmental and Resource Economists, vol. 5(1), pages 25-43, Winter.
  3. Veronika Grimm & Lyuba Ilieva, 2013. "An experiment on emissions trading: the effect of different allocation mechanisms," Journal of Regulatory Economics, Springer, vol. 44(3), pages 308-338, December.
  4. He, Haoran & Chen, Yefeng & Last Name, First Name, 2014. "Auction Mechanisms for Allocating Subsidies for Carbon Emissions Reduction: An Experimental Investigation," Discussion Papers dp-14-06-efd, Resources For the Future.

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