Assigning pollution permits: are uniform auctions efficient?

Álvarez, Francisco; Mazón, Cristina; André, Francisco J.

doi:10.1007/s00199-017-1089-1

Cited by 12 publications

(2 citation statements)

References 24 publications

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“…Khezr and MacKenzie [31] also showed that a uniform auction with allowance reserve could lead to distortion by unintentionally raising the clearing price higher. Alvarez et al [32] performed a theoretical assessment on the efficiency of uniform auctions as a means of allocating allowances. He showed that for a uniform auction to be effective there should be no correlation between the types of bidders as well as many bidders.…”

Section: Literature Review Of Consignment Auctionmentioning

confidence: 99%

Price Discovery of Consignment Auctions for Emission Permits

Song

Ahn

2021

Energies

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A consignment auction aims to increase political feasibility by reducing the financial burden of initial permits allocation and to do the role of price discovery. However, previous analytical models presented contradictory results for the price discovery function of a consignment auction. Thus, this study reexamines whether a consignment auction can perform its price discovery function. The study uses a simple game model with several assumptions differentiated from previous analytical models: explicit consideration of the secondary market and firms as price-takers with various behaviors to respond to uncertainty about the price in the secondary market. Firms are classified into three types: speculators who seek arbitrage, doctrinarians who determine a permit demand based on an estimation of their marginal abatement cost, and neutralists who keep a permit demand the same as initial emission endowments. The results reveal that when a consignment auction was introduced, the expected equilibrium price was identical to that of the secondary market price, demonstrating that the auction could deliver the price discovery function. This is because speculators and doctrinarians provide information about their price expectations and marginal abatement cost through their estimated demand functions. Additionally, the smaller number of neutralists is, and the higher the risk-seeking propensity of speculators is, the more effective the price discovery function is.

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Section: Literature Review Of Consignment Auctionmentioning

confidence: 99%

Price Discovery of Consignment Auctions for Emission Permits

Song

Ahn

2021

Energies

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“…This approach is consistent with simple and direct assignment mechanisms such as grandfathering and benchmarking. Since auctioning is becoming more relevant as a way to distribute the permits (for recent developments see [20][21][22]), a relevant (although technically complex) extension would be to endogenize the initial allocation by considering auctioning mechanisms.…”

Section: Concluding Remarks Policy Implications and Future Researchmentioning

confidence: 99%

Market Power in Output and Emissions Trading

André

Castro

2020

Games

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This article focuses on the strategic behavior of firms in the output and the emissions markets in the presence of market power. We consider the existence of a dominant firm in the permit market and different structures in the output market, including Cournot and two versions of the Stackelberg model, depending on whether the permit dominant firm is a leader or a follower in the output market. In all three models, the firm that dominates the permit market is more sensitive to its initial allocation than its competitor in terms of abatement and less sensitive in terms of output. In all three models, output is decreasing and the permit price is increasing in the permit dominant firm’s initial allocation. In the Cournot model, permit dominance is fruitless in terms of output and profit if the initial allocation is symmetric. Output leadership is more relevant than permit dominance since an output leader always tends to, ceteris paribus, produce more and make more profit whether it also dominates the permit market or not. This leadership can only be overcompensated for by distributing a larger share of permits to the output follower, and only if the total number of permits is large enough. In terms of welfare, Stackelberg is always superior to Cournot. If the initial permit allocation is symmetric, welfare is higher when the same firm dominates the output and the permit market at the same time.

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Strategic Interaction Among Firms in Output and Emission Markets: A Unified Framework

André

Castro

2019

International Series in Operations Research &Amp; Management Science

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Assigning pollution permits: are uniform auctions efficient?

Cited by 12 publications

References 24 publications

Price Discovery of Consignment Auctions for Emission Permits

Price Discovery of Consignment Auctions for Emission Permits

Market Power in Output and Emissions Trading

Strategic Interaction Among Firms in Output and Emission Markets: A Unified Framework

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