Using Contests to Allocate Pollution Rights

Ian Mackenzie; Nick Hanley; Tatiana Kornienko

doi:10.1016/j.enpol.2009.03.030

Using Contests to Allocate Pollution Rights

Ian Mackenzie, Nick Hanley, Tatiana Kornienko

School of Economics

Research output: Contribution to journal › Article › peer-review

Abstract

In this paper we advocate a new initial allocation mechanism for a tradable pollution permit market. We outline a Permit Allocation Contest (PAC) that distributes permits to firms based on their rank relative to other firms. This ranking is achieved by ordering firms based on an observable ‘external action’ where the external action is an activity or characteristic of the firm that is independent of their choice of emissions in the tradable permit market. We argue that this mechanism has a number of benefits over auctioning and grandfathering. Using this mechanism efficiently distributes permits, allows for the attainment of a secondary policy objective and has the potential to be more politically appealing than existing alternatives.

Original language	English
Pages (from-to)	2798–2806
Number of pages	9
Journal	Energy Policy
Volume	37
Issue number	7
DOIs	https://doi.org/10.1016/j.enpol.2009.03.030
Publication status	Published - Jul 2009

Keywords

Rank-order contests
Pollution permits
Initial allocation

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10.1016/j.enpol.2009.03.030

Using contests to allocate pollution rights
NOTICE: this is the author's version of a work that was accepted for publication in Energy Policy. Changes resulting from the publishing process, such as peer review, editing, corrections, structural formatting, and other quality control mechanisms may not be reflected in this document. Changes may have been made to this work since it was submitted for publication. A definitive version was subsequently published in Energy Policy, 37(7), 2798–2806, doi: 10.1016/j.enpol.2009.03.030
Accepted author manuscript, 189 KB

http://www.sciencedirect.com/science/article/pii/S0301421509001682

Cite this

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AB - In this paper we advocate a new initial allocation mechanism for a tradable pollution permit market. We outline a Permit Allocation Contest (PAC) that distributes permits to firms based on their rank relative to other firms. This ranking is achieved by ordering firms based on an observable ‘external action’ where the external action is an activity or characteristic of the firm that is independent of their choice of emissions in the tradable permit market. We argue that this mechanism has a number of benefits over auctioning and grandfathering. Using this mechanism efficiently distributes permits, allows for the attainment of a secondary policy objective and has the potential to be more politically appealing than existing alternatives.

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JO - Energy Policy

JF - Energy Policy

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Using Contests to Allocate Pollution Rights

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