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Auctioning Greenhouse Gas Emissions Permits in Australia

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Abstract

The allocation of permits is an important design aspect of an emissions trading scheme. Traditionally, governments have favoured the free allocation of greenhouse gas permits based on individual historical emissions (‘grandfathering’) or industry benchmark data. Particularly in the EU, the free allocation of permits has proven complex and inefficient and the distributional implications are politically difficult to justify; auctioning emissions permits has therefore become more popular. The EU is now moving to auction more than 50 per cent of all permits in 2013, and in the US the Regional Greenhouse Gas Initiative (RGGI) has begun auctioning more than 90 per cent of total allowances. Another case in point is the Australian proposal for a Carbon Pollution Reduction Scheme (CPRS), which provides for auctioning a significant share of total permits. This paper discusses the proposed Australian CPRS’s auction design. A major difference to other emissions trading schemes is that the CPRS plans to auction multiple vintages of emissions permits simultaneously.

Suggested Citation

  • Regina Betz & Stefan Seifert & Peter Cramton & Suzi Kerr, 2009. "Auctioning Greenhouse Gas Emissions Permits in Australia," Papers of Peter Cramton 09aghg, University of Maryland, Department of Economics - Peter Cramton, revised 2009.
    • Handle: RePEc:pcc:pccumd:09aghg
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    File URL: https://www.cramton.umd.edu/papers2005-2009/betz-seifert-cramton-kerr-australia-carbon-auction.pdf
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    Cited by:

    1. Tiho Ancev & Rimvydas Baltaduonis & Elizabeth Immer‐Bernold, 2021. "Regulating greenhouse gas emissions by an inter‐temporal policy mix: an experimental investigation," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 65(3), pages 512-538, July.
    2. Haoran He & Yefeng Chen, 2021. "Auction mechanisms for allocating subsidies for carbon emissions reduction: an experimental investigation," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 57(2), pages 387-430, August.
    3. Zhuo Hu & Dong Huang & Congjun Rao & Xiaolin Xu, 2016. "Innovative allocation mechanism design of carbon emission permits in China under the background of a low-carbon economy," Environment and Planning B, , vol. 43(2), pages 419-434, March.
    4. Corina Haita-Falah, 2016. "Uncertainty and speculators in an auction for emissions permits," Journal of Regulatory Economics, Springer, vol. 49(3), pages 315-343, June.
    5. Anping Chen & Nicolaas Groenewold & Alfred J. Hagger, 2013. "The regional economic effects of a reduction in carbon emissions," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 57(4), pages 483-500, October.
    6. Luca Corazzini & Stefano Galavotti & Rupert Sausgruber & Paola Valbonesi, 2017. "Allotment in first-price auctions: an experimental investigation," Experimental Economics, Springer;Economic Science Association, vol. 20(1), pages 70-99, March.
    7. Ancev, Tiho & Baltaduonis, Rimvydas & Immer-Bernold, Elizabeth, 2021. "Regulating greenhouse gas emissions by an inter-temporal policy mix: an experimental investigation," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 65(03), January.
    8. Boom, Anette, 2015. "Price Regulations in a Multi-unit Uniform Price Auction," VfS Annual Conference 2015 (Muenster): Economic Development - Theory and Policy 112998, Verein für Socialpolitik / German Economic Association.
    9. 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.
    10. 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.
    11. David McAdams & Giuseppe Lopomo & Leslie Marx & Brian Murray, "undated". "Carbon Allowance Auction Design: An Assessment of Options for the U.S," Working Papers 10-64, Duke University, Department of Economics.
    12. Tengda Lu & Xieer Dai & Jun Chen & Ming Dai, 2018. "Pricing Industrial Discharge Quota (IDQ): A Model Reflecting Opportunity Cost of Performing Ecological Responsibility," Sustainability, MDPI, vol. 10(6), pages 1-20, June.

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    JEL classification:

    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions

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