We compare auctioning and grandfathering as allocation mechanisms of emission permits when there is a secondary market with market power and the firms have private information. Based on real-life cases such as the EU ETS, we consider a multi-unit, multi-bid uniform auction, modelled as a...

Taking account of sinks credits as agreed in Bonn and Marrakech, this paper illustrates how market power could be exerted in the absence of the US ratification under Annex 1 trading and explores the potential implications of the non-competitive supply behavior for the international market of...

It has been shown in prior research that cost effectiveness in the competitive emissions permit market could be affected by tacit collusion or price manipulation when the corresponding polluting product market is oligopolistic. We analyze these cross market links using a Stackelberg model to...

In this paper we examine an alternative policy scenario, where governments allow polluting firms to trade permits in a strategic environmental policy model. We demonstrate, among other things, that with no market power in the permits market, governments of the exporting firms do not have an...

An experimental approach is used to examine the performance of three different multi-unit auction designs: discriminatory, uniform-price with fixed supply, and uniform-price with endogenous supply. We find that the strategies of the individual bidders and the aggregate demand curves are...

This paper studies the design of sin taxes when firms exercise market power. We outline an optimal tax framework that highlights how market power impacts the efficiency and redistributive properties of sin taxation, and quantify these effects in an application to sugar-sweetened beverage...