Browsing by Author "Botelho, Anabela"
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- An experimental analysis of grandfathering versus dynamic auctioning in the EU ETSPublication . Botelho, Anabela; Fernandes, Maria Eduarda; Pinto, LígiaPurpose – 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), with environmental targets more restrictive than the current ones but foreseeable for the near future. Methodology/approach – Two experimental treatments were run to achieve our goal. Both included the rules and the parameters that parallel the EU ETS structure, the only difference being the rule for the primary allocation of permits. Findings – 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. Practical implications – 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. This adds arguments favoring auctioning over grandfathering as the rule for the initial allocation of emission permits in the EU ETS. Originality/value of chapter – This study implements a theoretically appropriate auction format for the primary allocation of emission permits (the Ausubel (2004) auction) and incorporates a first attempt to include in the analysis measures of the risk preferences of subjects participating in emission permits experiments. These characteristics are for the first time implemented under a complex experimental design (including uncertainty of emission abatement, and banking), trying to parallel the EU ETS trading environment.
- An experimental analysis of grandfathering vs dynamic auctioning in the EU ETSPublication . Botelho, Anabela; Fernandes, Maria Eduarda; Pinto, LígiaThis 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.
- Diferentes métodos de distribuição inicial dos direitos de emissão de CO2 na União Europeia : impacto sobre a eficiênciaPublication . Fernandes, Maria Eduarda; Botelho, Anabela; Pinto, LígiaPara lidar com o problema das alterações climáticas globais a escolha tem recaído, sobretudo, em instrumentos de política ambiental baseados no funcionamento do mercado. O Protocolo de Quioto e o mercado europeu para transacção de direitos de emissão de CO2 (EU ETS – European Union Emissions Trading Scheme) são exemplos claros dessa mesma opção. Tendo em conta a sua importância e carácter inovador como política de combate a uma externalidade negativa ao nível global, um conhecimento mais profundo deste instrumento de política é essencial (...)
- Do emission permits markets' original advantages still hold?Publication . Fernandes, Maria Eduarda; Pinto, Lígia; Botelho, AnabelaEmission permits markets have been implemented all over the world but in very different conditions than those assumed in the original models developed by Dales (1968) or Montgomery (1972). This paper summarizes the assumptions that are violated when implementing this policy instrument. Reviewing the most significant literature in the area, we analyse the consequences of these violations for the outcome of emission permits markets, and derive conclusions about whether the traditional advantages associated with this instrument still hold. The major solutions that have been suggested for the identified market failures are also described. We find that despite the conflicting results reported in the literature, there are some conclusions unanimously accepted. Importantly, we find that the characteristics of market institutions are significant determinants of the outcome of these markets, which means that these aspects may no longer be treated as a mere detail as within the neoclassical approach. In addition, we find that these characteristics have important impacts on many other “market failures” identified in this paper. Since these aspects were not included in the original models, their predictions differ from the results effectively achieved with the implementation of an emissions permit market.
- EU ETS allocation rules : an experimental examination of the Ausubel auctionPublication . Botelho, Anabela; Fernandes, Maria Eduarda; Pinto, LígiaThe European Union (EU), Emissions Trading System (ETS) is a major tool of the European Union’s policy aimed at mitigating global climate change. Since its introduction in 2005, the system has undergone several changes whereby auctions, rather than cost-free allocation, have been given an increasing role as a means of allocating emission permits. These auctions are currently run as sealed-bid, uniform-price auctions which induce demand reduction in multi-unit environments such as the EU ETS. This auction format may therefore contribute to the growing surplus of permits observed in the EU ETS. In this Chapter, we examine the performance of the theoretically appropriate Ausubel auction format under structural characteristics mimicking those in place in the EU ETS. The results provide evidence supporting the desirable properties of the Ausubel auction, but also indicate that it may lead to inequitable outcomes. In view of this, it is worthwhile to study not only how alternative auction formats could provide a sustainable solution to the surplus of permits, but also how they relate to the problem of carbon leakage resulting from regional carbon trading schemes.
- European Union's CO2 emission permits market : an experimental studyPublication . Fernandes, Maria Eduarda; Pinto, Lígia; Botelho, AnabelaGlobal warming is a major issue on international political agendas regardless of the uncertainties and divergences still remaining on the real dimension of the problem. Scientific community disagreement on its true consequences for human life is even bigger but public opinion urges for action. Anthropogenic greenhouse gases (GHG) emissions became the target and its mitigation compulsory, as they are pointed as key responsible for the sudden and severe global climate change we are facing. Therefore, to choose the best policy instrument to achieve this environmental goal while minimizing the consequences for economies competitiveness is a crucial task (...)
- Grandfathering vs. auctioning in the EU ETS : an experimental studyPublication . Botelho, Anabela; Fernandes, Maria Eduarda; Pinto, LígiaThe present paper is the first to simultaneously include rules and parameters that try to parallel the EU ETS in the laboratory. To study the adequacy of the institution chosen for the EU ETS is our goal as well as testing the impact of changing the initial allocation rule: auctioning instead of grandfathering, in two different experimental treatments. The use of auctions as a rule for the initial allocation method for CO2 emission permits, in the next stages of the EU ETS (European Union Emissions Trading Scheme) is a subject the European Commission and its Member-States are currently discussing and evaluating. This paper is the first to experimentally test the Ausubel (2004) auction for the case of CO2 emission permits in the EU ETS, a theoretically efficient dynamic design for multiple units with results equivalent to the Vickrey auction. Our experimental results suggest that the Ausubel auction does not allocate CO2 emission permits efficiently but at the end total abatement cost minimization is still achieved in the auctioning treatment. The importance of the secondary market, and its functioning rules, is highlighted in this experimental treatment. Moreover, we conclude efficiency is the same whether emission permits are initially auctioned or grandfathered.
- Low carbon technology investment under grandfathered versus auctioned emission permitsPublication . Botelho, Anabela; Fernandes, Maria Eduarda; Pinto, Lígia Costa
- More on the dynamic Vickrey mechanism for multi-unit auctions : an experimental study on the emission permits initial auctionPublication . Botelho, Anabela; Pinto, Lígia; Fernandes, Maria EduardaThe purpose of this paper is to contribute to the multiple-units auction literature, by testing the performance of the dynamic Vickrey auction (the Ausubel model), in an experimental setting, representing the functioning of an emission permits market with an Ausubel auction for the initial allocation of permits. Other features of the experiment include the possibility of banking and the inclusion of uncertainty, and the parameters were set so as to replicate an environment similar to the EU-ETS market (...)
- The Ausubel auction in the EU ETSPublication . Botelho, Anabela; Fernandes, Maria Eduarda; Pinto, Lígia