An experimental investigation of repeated auctions and secondary market trading in emissions markets with bankable allowances

Department of Economics Working Paper Series Can Auctions Control Market Power in Emissions Trading Markets? Can Auctions Control Market Power in Emissions Trading Markets?

Using eight sessions (twenty-four ten-period markets) in a double ABA cross-over design, we demonstrate clear evidence of market power in double-auction emission trading markets (agents who are not constrained to only buy or sell). Conventional theory predicts that in half of the market-power environments monopsony should emerge and in half monopoly should emerge. Market-power outcomes are freq...

The Choice of Instruments for Pollution Emission Permit Trading: Designing a Laboratory Environment

Important decisions in designing markets for tradable pollution emission permits have focussed on whether to allow banking of permits and the selection of the trading institution for the transfer of permits. Recent studies in laboratory markets suggest that banking will be particularly important when uncertainty about actual emissions requires trading in a reconciliation period after the quanti...

The EU Emissions Trading Scheme and the Challenges for Large Scale Auctioning

Arguably, the climate talks in Copenhagen in December 2010 did not deliver on the high expectations the world had raised for a post-Kyoto agreement. But the commitment to confront climate change at the highest level is beyond doubt. At the time of writing, the EU Commission is to propose a draft regulation on large scale auctioning in the European Union Emissions Trading Scheme (EU ETS) startin...

Can Auctions Control Market Power in Emissions Trading Markets?

California’s CO2 Cap-and-Trade System in Power Sector – Effects of Point-of-Regulation and Allowances Allocation on Emissions Leakage and Contract Shuffling

In response to Assembly Bill 32, the State of California is considering three types of carbon emissions trading programs for the electric power sector: load-based, source-based, and firstseller. They differ in terms of their point-of-regulation. In this talk, we formulate a market equilibrium model for each of the three approaches, considering power markets, transmission networks, and emissions...