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Auctioning Greenhouse Gas Emissions Permits in Australia

  • Betz, Regina
  • Seifert, Stefan
  • Cramton, Peter
  • Kerr, Suzi

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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File URL: http://purl.umn.edu/94878
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Paper provided by Australian National University, Environmental Economics Research Hub in its series Research Reports with number 94878.

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Date of creation: 22 May 2009
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Handle: RePEc:ags:eerhrr:94878
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  2. Peter Cramton, 1997. "The FCC Spectrum Auctions: An Early Assessment," Papers of Peter Cramton 97jemsfcc, University of Maryland, Department of Economics - Peter Cramton, revised 12 Jul 1998.
  3. 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.
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  7. 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.
  8. Jos Sijm & Karsten Neuhoff & Yihsu Chen, 2006. "CO 2 cost pass-through and windfall profits in the power sector," Climate Policy, Taylor & Francis Journals, vol. 6(1), pages 49-72, January.
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  10. 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.
  11. 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.
  12. Martin Feldstein, 1999. "Tax Avoidance And The Deadweight Loss Of The Income Tax," The Review of Economics and Statistics, MIT Press, vol. 81(4), pages 674-680, November.
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  14. Manelli, Alejandro M. & Sefton, Martin & Wilner, Benjamin S., 2006. "Multi-unit auctions: A comparison of static and dynamic mechanisms," Journal of Economic Behavior & Organization, Elsevier, vol. 61(2), pages 304-323, October.
  15. Charles A. Holt & William Shobe & Dallas Burtraw & Karen Palmer & Jacob K. Goeree, 2007. "Auction Design for Selling CO2 Emission Allowances Under the Regional Greenhouse Gas Initiative," Reports 2007-03, Center for Economic and Policy Studies.
  16. Porter, David & Rassenti, Stephen & Shobe, William & Smith, Vernon & Winn, Abel, 2009. "The design, testing and implementation of Virginia's NOx allowance auction," Journal of Economic Behavior & Organization, Elsevier, vol. 69(2), pages 190-200, February.
  17. Armstrong, Mark, 2000. "Optimal Multi-object Auctions," Review of Economic Studies, Wiley Blackwell, vol. 67(3), pages 455-81, July.
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