Using contests to allocate pollution rights

I.A. MacKenzie, N. Hanley, T. Kornienko

    Research output: Contribution to journalArticlepeer-review

    14 Citations (Scopus)

    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 languageEnglish
    Pages (from-to)2798-2806
    Number of pages9
    JournalEnergy Policy
    Volume37
    Issue number7
    DOIs
    Publication statusPublished - 1 Jul 2009

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