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Carbon allowance auction design: An assessment of options for the United States

Publication ,  Journal Article
Lopomo, G; Marx, LM; McAdams, D; Murray, B
Published in: Review of Environmental Economics and Policy
January 1, 2011

Carbon allowance auctions are a component of existing and proposed regional cap-and-trade programs in the United States and are also included in recent proposed bills in the U.S. Congress that would establish a national cap-and-trade program to regulate greenhouse gases ("carbon"). We discuss and evaluate the two leading candidates for auction format: a uniform-price sealed-bid auction and an ascending-bid dynamic auction, either of which could be augmented with a "price collar" to ensure that the price of allowances is neither too high nor too low. We identify the primary trade-offs between these two formats as applied to carbon allowance auctions and suggest additional auction design features that address potential concerns about efficiency losses from collusion and other factors. We conclude that, based on currently available evidence, a uniform-price sealed-bid auction is more appropriate for the sale of carbon allowances than the other leading auction formats, in part because it offers increased robustness to collusion without significant sacrifice of price discovery. © The Author 2011. Published by Oxford University Press on behalf of the Association of Environmental and Resource Economists. All rights reserved.

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Published In

Review of Environmental Economics and Policy

DOI

EISSN

1750-6824

ISSN

1750-6816

Publication Date

January 1, 2011

Volume

5

Issue

1

Start / End Page

25 / 43

Related Subject Headings

  • Agricultural Economics & Policy
  • 3801 Applied economics
  • 3502 Banking, finance and investment
  • 1402 Applied Economics
  • 0502 Environmental Science and Management
 

Citation

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Lopomo, G., Marx, L. M., McAdams, D., & Murray, B. (2011). Carbon allowance auction design: An assessment of options for the United States. Review of Environmental Economics and Policy, 5(1), 25–43. https://doi.org/10.1093/reep/req024
Lopomo, G., L. M. Marx, D. McAdams, and B. Murray. “Carbon allowance auction design: An assessment of options for the United States.” Review of Environmental Economics and Policy 5, no. 1 (January 1, 2011): 25–43. https://doi.org/10.1093/reep/req024.
Lopomo G, Marx LM, McAdams D, Murray B. Carbon allowance auction design: An assessment of options for the United States. Review of Environmental Economics and Policy. 2011 Jan 1;5(1):25–43.
Lopomo, G., et al. “Carbon allowance auction design: An assessment of options for the United States.” Review of Environmental Economics and Policy, vol. 5, no. 1, Jan. 2011, pp. 25–43. Scopus, doi:10.1093/reep/req024.
Lopomo G, Marx LM, McAdams D, Murray B. Carbon allowance auction design: An assessment of options for the United States. Review of Environmental Economics and Policy. 2011 Jan 1;5(1):25–43.
Journal cover image

Published In

Review of Environmental Economics and Policy

DOI

EISSN

1750-6824

ISSN

1750-6816

Publication Date

January 1, 2011

Volume

5

Issue

1

Start / End Page

25 / 43

Related Subject Headings

  • Agricultural Economics & Policy
  • 3801 Applied economics
  • 3502 Banking, finance and investment
  • 1402 Applied Economics
  • 0502 Environmental Science and Management