Auction Design for Selling CO&lt;sub&gt;2&lt;/sub&gt; Emission Allowances Under the Regional Greenhouse Gas Initiative

Holt, Charles A.; Shobe, William; Burtraw, Dallas; Palmer, Karen; Goeree, Jacob K.

doi:10.2139/ssrn.2459462

Cited by 46 publications

(35 citation statements)

References 35 publications

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“…The results of this "elastic demand" treatment are reported in Holt et al (2007). This treatment also failed to reveal any clear performance differences between auction formats in terms of revenue and efficiency.…”

Section: Richer Setting With No Communicationmentioning

confidence: 91%

“…We have recently finished conducting a series of sessions where, after several auctions with stationary conditions, there is an unanticipated demand shift that raised permit values for some bidders and not for others. We had expected that releasing excess demand information in a clock auction would help bidders discover and react to the change during the first auction following the demand shift, but the two flavors of clock, with and without excess demand information, tracked the shift up in the Walrasian price equally well, and neither did noticeably better than a simple sealed-bid uniform-price auction (Holt et al, 2007).…”

Section: Collusion In Auctions For Emission Permits / 687mentioning

confidence: 99%

“…Experimental studies are being used with increasing frequency to assist in the design of public policy (Cummings, Holt, & Laury, 2004;Holt et al, 2007). Early experiments comparing sealed-bid uniform and discriminatory auctions suggest that the preferred auction type for revenue generation may depend on market characteristics particular to the good being sold.…”

Section: Introductionmentioning

confidence: 99%

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Collusion in auctions for emission permits: An experimental analysis

Burtraw

Goeree²,

Holt

et al. 2009

J Policy Anal Manage

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Environmental markets have several institutional features that provide a new context for the use of auctions and that have not been studied previously. This paper reports on laboratory experiments testing three auction forms-uniform and discriminatory price sealed-bid auctions and an ascending clock auction. We test the ability of subjects to tacitly or explicitly collude in order to maximize profits. Our main result is that the discriminatory and uniform price auctions produce greater revenues than the clock auction, both with and without explicit communication. The clock appears to facilitate successful collusion, both because of its sequential structure and because it allows bidders to focus on one dimension of cooperation (quantity) rather than two (price and quantity).© 2009 by the Association for Public Policy Analysis and Management.

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Section: Richer Setting With No Communicationmentioning

confidence: 91%

Section: Collusion In Auctions For Emission Permits / 687mentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

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Collusion in auctions for emission permits: An experimental analysis

Burtraw

Goeree²,

Holt

et al. 2009

J Policy Anal Manage

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“…Further evidence has been provided-for a range of auction types-that show permit auction clearing prices track underlying market conditions accurately (Burtraw et al, 2010a). 4 For the preliminary auction design of RGGI see Holt et al (2007). An extensive debate exists over the effectiveness of allowance reserves.…”

mentioning

confidence: 99%

Permit market auctions with allowance reserves

Khezr

MacKenzie

2018

International Journal of Industrial Organization

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This article investigates pollution permit auctions that incorporate allowance reserves. In these auctions the sale of a fixed quantity of permits is supplemented by an additional permit reserve. This reserve automatically releases permits if a sufficiently high price is triggered. The main justifications for implementing an allowance reserve are to reduce price volatility as well as assisting in cost containment. We show-paradoxically-that incorporating an allowance reserve into a permit auction can decrease firms' payoffs, increase the clearing price, and increase compliance costs. This has implications for all major cap-and-trade markets, including the US Regional Greenhouse Gas Initiative.

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“…How to combine the governmental and firms' auction supply? To guarantee a source to purchase allowances gradually through a trading phase, quarterly auctions might be appropriate, as also proposed by Cramton (2007) and Holt et al (2007).…”

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confidence: 99%

Auctioning of CO2 Emission Allowances in Phase 3 of the EU Emissions Trading Scheme

Löschel¹,

Sturm

Benz

2008

SSRN Journal

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Die Dis cus si on Pape rs die nen einer mög lichst schnel len Ver brei tung von neue ren For schungs arbei ten des ZEW. Die Bei trä ge lie gen in allei ni ger Ver ant wor tung der Auto ren und stel len nicht not wen di ger wei se die Mei nung des ZEW dar.Dis cus si on Papers are inten ded to make results of ZEW research prompt ly avai la ble to other eco no mists in order to encou ra ge dis cus si on and sug gesti ons for revi si ons. The aut hors are sole ly respon si ble for the con tents which do not neces sa ri ly repre sent the opi ni on of the ZEW.Download this ZEW Discussion Paper from our ftp server:ftp://ftp.zew.de/pub/zew-docs/dp/dp08081.pdf Zusammenfassung Non-technical SummaryOur paper is motivated by the "Climate action and renewable energy package" proposed by the European Commission in the beginning of 2008. It suggests auctioning as basic principle for allocation for the upcoming third trading phase of the EU Emissions Trading Scheme (Phase 3) that runs from 2013 to 2020. Explicitly, in the power sector 100 % auctioning is proposed from 2013 onwards. In all other sectors it is suggested to start with an initial auctioning share of 20 % in 2013, to be increased to 100 % by 2020. Overall, it is estimated that at least two third of the total quantity of allowances will be auctioned in 2013. The drastic increase of auctioned allowances in contrast to grandfathering in the past will change the market structure in Phase 3. For a given cap, with an augmenting auction supply the possibility to purchase allowances in the secondary market decreases. As a consequence, market liquidity is extracted suggesting a thinner secondary market than in earlier trading phases.Based on the theoretical and empirical literature we firstly emphasize the importance of a properly chosen auction design as the significantly higher auction share, compared to the past and current trading phases, is expected to yield a thin, non-competitive secondary market for CO 2 allowances. Secondly, we elaborate main criteria that a viable auction design is supposed to fulfil and propose a specific auctions design for Phase 3. As criteria we state that the auction should create early and reliable price signals to support correct abatement decisions. The auction should also allocate the allowances to the firms that need them most, i.e. to the firms with the highest marginal abatement costs. Additionally, it should be designed simple and transparent to enhance trust and credibility of the market in the trading scheme and thus enforce intensive participation. Thirdly, we recommend a specific auction design. We argue that the regulator should apply a simultaneous dynamic uniform double auction, in order to achieve best the above mentioned criteria. In this auction firms may both buy and sell allowances. The dynamic implementation ensures that bidders get information over the scarcity of the allowances from the excess demand. Furthermore, all successful bidders pay the same price per allowance. In addition, we conclude that auctioning allowance...

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Auction Design for Selling CO<sub>2</sub> Emission Allowances Under the Regional Greenhouse Gas Initiative

Cited by 46 publications

References 35 publications

Collusion in auctions for emission permits: An experimental analysis

Collusion in auctions for emission permits: An experimental analysis

Permit market auctions with allowance reserves

Auctioning of CO2 Emission Allowances in Phase 3 of the EU Emissions Trading Scheme

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