An experimental analysis of grandfathering vs dynamic auctioning in the EU ETS
This study constitutes a first attempt to experimentally test the performance of a 100% auction versus a 100% free allocation of CO2 permits under the rules and parameters that mimic the EU ETS (imperfect competition, uncertainty in emissions’ control, and allowing banking). It also incorporates a first attempt to include in the analysis measures of the risk preferences of subjects participating in emission permits experiments. Another distinctive feature of this study is the implementation of a theoretically appropriate auction format for the primary allocation of emission permits. Our experimental results indicate that the EU ETS has the potential to reduce CO2 emissions, achieving targets considerably more restrictive than the current ones at high efficiency levels, both with auctioned and free emission permits. Auctioning, however, reveals a clear potential to do better than grandfathering the initial allocation of permits. In addition, the results reveal that concerns about undue scarcity, and corresponding high prices, in secondary markets generated by a primary auction market are not warranted under the proposed dynamic auction format.
|Date of creation:||Oct 2010|
|Date of revision:|
|Contact details of provider:|| Postal: NIMA, EEG - Universidade do Minho, 4710-057 Braga, Portugal|
Phone: +351 253601930
Fax: +351 253601380
Web page: http://nima.eeg.uminho.pt/
|Order Information:|| Postal: NIMA, EEG - Universidade do Minho, 4710-057 Braga, Portugal|
Web: http://nima.eeg.uminho.pt/ Email:
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Johan Eyckmans & Jan Cornillie, 2000. "Efficiency and Equity of the EU Burden Sharing Agreement," Energy, Transport and Environment Working Papers Series ete0002, Katholieke Universiteit Leuven, Centrum voor Economische Studiën, Energy, Transport and Environment, revised Jun 2002.
- L. Gangadharan & A. Farrell & R. Croson, 2005.
"Investment Decisions and Emissions Reductions : Results from Experiments in Emissions Trading,"
Department of Economics - Working Papers Series
942, The University of Melbourne.
- Lata Gangadharan & Rachel Croson & Alex Farrell, 2013. "Investment decisions and emissions reductions: results from experiments in emissions trading," Chapters, in: Handbook on Experimental Economics and the Environment, chapter 8, pages 233-264 Edward Elgar Publishing.
- Richard Newell & William Pizer & Jiangfeng Zhang, 2005.
"Managing Permit Markets to Stabilize Prices,"
Environmental & Resource Economics,
European Association of Environmental and Resource Economists, vol. 31(2), pages 133-157, 06.
- Stuart Mestelman & Andrew Muller, 1997.
"Emissions Trading with Shares and Coupons when Control over Discharges is Uncertain,"
McMaster Experimental Economics Laboratory Publications
1997-01, McMaster University.
- Godby, Robert W. & Mestelman, Stuart & Muller, R. Andrew & Welland, J. Douglas, 1997. "Emissions Trading with Shares and Coupons when Control over Discharges Is Uncertain," Journal of Environmental Economics and Management, Elsevier, vol. 32(3), pages 359-381, March.
- Cason, Timothy N & Gangadharan, Lata, 2003. "Transactions Costs in Tradable Permit Markets: An Experimental Study of Pollution Market Designs," Journal of Regulatory Economics, Springer, vol. 23(2), pages 145-65, March.
- Urs Fischbacher, 2007. "z-Tree: Zurich toolbox for ready-made economic experiments," Experimental Economics, Springer, vol. 10(2), pages 171-178, June.
When requesting a correction, please mention this item's handle: RePEc:nim:nimawp:39/2010. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (NIMA)
If references are entirely missing, you can add them using this form.