The Evolution of Pollution Auctions
Abstract
This article traces the evolution of pollution auctions. The article examines how auction design began with an initially simple auction format and has progressed over time, focusing on auctions in three key pollution regulation programs: the EU Emissions Trading Scheme, the US Regional Greenhouse Gas Initiative, and the California Cap-and-Trade Program. In response to the unique characteristics of pollution regulation, which is aimed at achieving both cost containment and market participation, regulators have created novel and interesting auction designs. The article reviews the theoretical and experimental evidence concerning the outcomes of current auction programs and highlights unique design features of these regulatory systems that are fundamental to both their development and success. A key finding of the article is that even small changes in auction design can lead to significant differences in auction outcomes.
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Price-based collars as used in US allowance markets do not suffer from the downward-sloping supply curve shortcoming.
“Price-based collars as used in US allowance markets (Burtraw et al. 2022, MacKenzie 2022) do not suffer from this shortcoming”
From The Market Stability Reserve in the EU Emissions Trading System: A Critical Review (2023) · cites this paper as MacKenzie 2022
Different jurisdictions have thus far adopted different price-control mechanisms.
“In practice, different jurisdictions have thus far adopted different PCMs.”
From The Market Stability Reserve in the EU Emissions Trading System: A Critical Review (2023) · cites this paper as MacKenzie 2022
Price-based PCMs have been implemented in most jurisdictions, though with slightly different rules in terms of trigger prices and mechanisms and the degree of discretion in the government intervention.
“Price-based PCMs have been implemented in most jurisdictions, though with slightly different rules in terms of trigger prices and mechanisms and the degree of discretion in the government intervention.”
From The Market Stability Reserve in the EU Emissions Trading System: A Critical Review (2023) · cites this paper as MacKenzie 2022
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- Authors
- MacKenzie, I. A.
- Affiliations
- The University of Queensland (AU)
- Corresponding author
- MacKenzie, Ian A.
- ORCID
- MacKenzie, Ian A.
- Venue
- Review of Environmental Economics and Policy
- Publisher
- University of Chicago Press
- Published
- 2022-01-01
- Volume
- 16
- Issue
- 1
- Pages
- 1-24
- ISSN
- 1750-6816 (ISSN-L)
- 1750-6824
- OpenAlex
- W4205720553
- Cited by
- 16
- References
- 50
- Citations by year
- 2026: 2 · 2025: 1 · 2024: 2 · 2023: 2 · 2022: 9
- FWCI
- 2.14
- Type
- journal article
- Language
- en
- Open access
- closed
- Locations
- Review of Environmental Economics and Policy (publishedVersion)
- Topics
- Social Sciences › Decision Sciences › Management Science and Operations Research › Auction Theory and Applications
- Social Sciences › Economics, Econometrics and Finance › Economics and Econometrics › Climate Change Policy and Economics
- Social Sciences › Business, Management and Accounting › Strategy and Management › Regulation and Compliance Studies
- Keywords
- auction design, emissions trading, EU Emissions Trading System, Regional Greenhouse Gas Initiative, environmental regulation, auction outcomes, market participation, cost containment
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