RMIT University
Browse

Revenue and efficiency in pollution permit allocation mechanisms

journal contribution
posted on 2024-11-02, 14:55 authored by Peyman KhezrPeyman Khezr, Ian Mackenzie
A contentious design issue within pollution markets is the choice of initial allocation mechanism. Within this debate, auctions have become the predominant method of allocation. Although auctions provide potential gains—such as revenue generation, efficiency, and price discovery—these benefits are rarely realized due to firms submitting non-truthful bids. We propose a mechanism that can improve on existing auctions. We allow the regulator to determine the supply once all bids have been submitted. This incites truthful revelation of firms' private abatement costs, maximizes revenue, and allocates permits efficiently. This is relevant to existing permit auctions in the US and Europe.

History

Journal

Energy Economics

Volume

93

Number

105033

Start page

1

End page

8

Total pages

8

Publisher

Elsevier BV

Place published

Netherlands

Language

English

Copyright

© 2020 Elsevier B.V. All rights reserved.

Former Identifier

2006103855

Esploro creation date

2021-04-21

Usage metrics

    Scholarly Works

    Exports

    RefWorks
    BibTeX
    Ref. manager
    Endnote
    DataCite
    NLM
    DC