LAPSE:2019.0207
Published Article
LAPSE:2019.0207
Carbon Auction Revenue and Market Power: An Experimental Analysis
Noah Dormady
January 31, 2019
State and regional governments in the U.S. and abroad are looking to market-based approaches to mitigating greenhouse gas emissions from the electric sector, and in the U.S. as a compliance approach to meeting the aggressive targets of the Environmental Protection Agency (EPA)’s Clean Power Plan. Auction-based approaches, like those used in the Northeast U.S. and California, are both recommended strategies under the Plan and attractive to state governments because they can generate significant revenue from the sale of emissions permits. However, given the nature of imperfect competition in existing electricity markets, particularly at the state and regional level, the issue of market power is a concern at the forefront. This paper provides the results from a controlled laboratory experiment of an auction-based emissions market in the electricity sector. The results show that government revenue from auctioning emissions permits is substantially lower when market concentration is only moderately increased. The results hold significant implications for states and other subnational governments that have high revenue expectations from the auctioning of emissions permits.
Keywords
cap-and-trade, carbon auctions, Clean Air Act, Clean Power Plan, climate change, government revenue, market power
Suggested Citation
Dormady N. Carbon Auction Revenue and Market Power: An Experimental Analysis. (2019). LAPSE:2019.0207
Author Affiliations
Dormady N: John Glenn College of Public Affairs, The Ohio State University, 1810 College Rd, Columbus, OH 43210, USA
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Journal Name
Energies
Volume
9
Issue
11
Article Number
E897
Year
2016
Publication Date
2016-11-01
Published Version
ISSN
1996-1073
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Original Submission
Other Meta
PII: en9110897, Publication Type: Journal Article
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LAPSE:2019.0207
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doi:10.3390/en9110897
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Jan 31, 2019
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CC BY 4.0
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[v1] (Original Submission)
Jan 31, 2019
 
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Jan 31, 2019
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https://psecommunity.org/LAPSE:2019.0207
 
Original Submitter
Calvin Tsay
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