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Abstract(s)
The 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.
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Citation
Botelho, A.; Fernandes, E. & Pinto, L. M. C. (2016). “EU ETS Allocation Rules: An Experimental Examination of the Ausubel Auction” in The WSPC Reference on Natural Resources and Environmental Policy in the Era of Global Change. Editor-in-chief: Ariel Dinar (UC Riverside), Vol. 4, Experimental Economics, Chapter 8 (p.179-204). World Scientific Publishing. ISBN 9814713732
Publisher
World Scientific Publishing