Auctioning Greenhouse Gas Emissions Permits in Australia
The allocation of permits is an important design aspect of an emissions trading scheme. Traditionally, governments have favoured a free allocation of greenhouse gas permits based on individual historical emissions (“grandfathering”) or industry benchmark data. As, 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 become more popular. The EU is now moving to auctioning more than 50% of all permits in 2013 and in the U.S. the Regional Greenhouse Gas Initiative (RGGI) has started with auctioning 100%. Another case in point is the Austra-lian proposal for a Carbon Pollution Reduction Schemes (CPRS) which provides for auctioning a significant share of total permits. This paper discusses some important theoretical and practical aspects of designing an auction for allocating emissions per-mits in Australia. The specific design details proposed here have been adopted by the Australian Government in their CRPS White Paper. Particularly interesting is the pro-posed structure of auctioning multiple emissions units of different vintages simultane-ously.
Auctions, carbon auctions, greenhouse gas auctions
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