An Experimental Analysis of Auctioning Emissions Allowances under a Loose Cap

by William Shobe, Karen L. Palmer, Erica Myers, Charles Holt, Jacob Goeree, Dallas Burtraw

- This study is motivated by the observation that all of the major implementations of cap-and-trade regulations for the control of air pollution have started with a generous allocation of allowances relative to recent emissions history, a situation we refer to as a "loose cap." Typically more stringent reductions are achieved in subsequent years of a program. We use an experimental setting to investigate the effects of a loose cap environment on a variety of auction types.

Shobe, W., K.L. Palmer, E. Myers, C. Holt, J. Goeree, D. Burtraw (2009). "An Experimental Analysis of Auctioning Emissions Allowances under a Loose Cap." RFF Discussion Paper 09-25, June 2009.