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Consignment auctions

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  • Khezr, Peyman
  • MacKenzie, Ian A.

Abstract

This article investigates pollution permit consignment auctions. In this process firms obtain an initial endowment of permits that must be consigned to the auctioneer for sale. In the auction, firms bid for permits, obtain their equilibrium permit allocations, and receive revenue from their consigned permits. It has been proposed that this auction is politically attractive and generates clear price discovery. We provide the first theoretical analysis of this kind of auction. We show, in most cases, the auction does not provide a clear price signal. Our results have policy implications for many permit markets, including the California Cap-and-Trade Program.

Suggested Citation

  • Khezr, Peyman & MacKenzie, Ian A., 2018. "Consignment auctions," Journal of Environmental Economics and Management, Elsevier, vol. 87(C), pages 42-51.
  • Handle: RePEc:eee:jeeman:v:87:y:2018:i:c:p:42-51
    DOI: 10.1016/j.jeem.2017.11.003
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    References listed on IDEAS

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    1. Ledyard, John O. & Szakaly-Moore, Kristin, 1994. "Designing organizations for trading pollution rights," Journal of Economic Behavior & Organization, Elsevier, vol. 25(2), pages 167-196, October.
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    5. Cason, Timothy N, 1995. "An Experimental Investigation of the Seller Incentives in the EPA's Emission Trading Auction," American Economic Review, American Economic Association, vol. 85(4), pages 905-922, September.
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    7. Lawrence M. Ausubel & Peter Cramton & Marek Pycia & Marzena Rostek & Marek Weretka, 2014. "Demand Reduction and Inefficiency in Multi-Unit Auctions," Review of Economic Studies, Oxford University Press, vol. 81(4), pages 1366-1400.
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    19. Robert Wilson, 1979. "Auctions of Shares," The Quarterly Journal of Economics, Oxford University Press, vol. 93(4), pages 675-689.
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    24. Khezr, Peyman & MacKenzie, Ian A., 2018. "Permit market auctions with allowance reserves," International Journal of Industrial Organization, Elsevier, vol. 61(C), pages 283-306.
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    Citations

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    Cited by:

    1. Leal, Mariel & Garcia, Arturo & Lee, Sang-Ho, 2018. "Excess burden of taxation and environmental policy mix with a consumer-friendly firm," MPRA Paper 88256, University Library of Munich, Germany, revised 2018.
    2. repec:gam:jsusta:v:11:y:2019:i:5:p:1365-:d:211104 is not listed on IDEAS
    3. Peyman Khezr & Ian A. MacKenzie, 2018. "An efficient and implementable auction for environmental rights," Discussion Papers Series 587, School of Economics, University of Queensland, Australia.
    4. Peyman Khezr & Ian A. MacKenzie, 2018. "Revenue and efficiency in pollution permit allocation mechanisms," Discussion Papers Series 601, School of Economics, University of Queensland, Australia.
    5. repec:eee:reveco:v:58:y:2018:i:c:p:523-537 is not listed on IDEAS
    6. García, Arturo & Leal, Mariel & Lee, Sang-Ho, 2018. "Time-inconsistent environmental policies with a consumer-friendly firm: Tradable permits versus emission tax," International Review of Economics & Finance, Elsevier, vol. 58(C), pages 523-537.
    7. Khezr, Peyman & MacKenzie, Ian A., 2018. "Permit market auctions with allowance reserves," International Journal of Industrial Organization, Elsevier, vol. 61(C), pages 283-306.
    8. repec:eee:enepol:v:107:y:2017:i:c:p:337-344 is not listed on IDEAS

    More about this item

    Keywords

    Pollution permit auction; Consignment;

    JEL classification:

    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions
    • Q52 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Pollution Control Adoption and Costs; Distributional Effects; Employment Effects

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