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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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    Cited by:

    1. Mariel Leal & Arturo Garcia & Sang-Ho Lee, 2019. "Excess Burden of Taxation and Environmental Policy Mix with a Consumer-Friendly Firm," The Japanese Economic Review, Springer, vol. 70(4), pages 517-536, December.
    2. Liu, Yun & Tan, Bowen, 2021. "Consignment auctions revisited," Economics Letters, Elsevier, vol. 203(C).
    3. Jae-Do Song & Young-Hwan Ahn, 2019. "Cognitive Bias in Emissions Trading," Sustainability, MDPI, Open Access Journal, vol. 11(5), pages 1-13, March.
    4. 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.
    5. Khezr, Peyman & MacKenzie, Ian A., 2021. "Revenue and efficiency in pollution permit allocation mechanisms," Energy Economics, Elsevier, vol. 93(C).
    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. Burtraw, Dallas & McCormack, Kristen, 2017. "Consignment auctions of free emissions allowances," Energy Policy, Elsevier, vol. 107(C), pages 337-344.

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    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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