The allocation of permits is an important design aspect of an emissions trading scheme. Traditionally, governments have favoured the free allocation of greenhouse gas permits based on individual historical emissions ('grandfathering') or industry benchmark data. Particularly in the European...

A detailed proposal for an economy-wide emissions trading scheme in Australia was tabled by the government in December 2008 with a proposed start date for mid-2010. The government proposes unilateral linking, with no initial bilateral linkages, through the clean development mechanism and joint...

Regulators around the world are currently considering national emissions trading systems (ETS) as a cost-effective way to reduce greenhouse gas emissions. ETS installations coverage is one of the numerous design issues confronting them. ‘Blanket coverage’ that includes all an economy’s...

An additional action reserve (AAR) is proposed as a mechanism that allows government and voluntary private interests to make additional emission reductions beyond a national cap. A proportion of Australian emission units (AEUs) is set aside each year. The units can then be retired if state or...

Allocating permits based on individual historical emissions (‘grandfathering’), or industry benchmark data, is an important design aspect of an emissions trading scheme. Free permit allocation has proven complex and inefficient (particularly in the European Union) with distribution...

We analyse the efficiency effects of the initial permit allocation given to firms with market power in both permit and output market. We examine two models: a long- run model with endogenous technology and capacity choice, and a short-run model with fixed technology and capacity. In the long...

This paper investigates the behavioural implications of penalty designs on market performance using an experimental method. Three penalty types and two penalty levels are enforced in a laboratory permit market with auctioning, including the Australian Carbon Pollution Reduction Scheme proposed...

This paper employs a theoretical model to examine compliance incentives and market efficiency under three penalty types: the fixed penalty rate, which uses a constant marginal financial penalty; the make-good provision (quantity penalty), where each missing permit in the current period is to be...

The EU Emission Trading Scheme (EU ETS) for CO2-emissions from energy and industry installations reflects a paradigm shift towards market-based instruments for environmental policy in the EU. The centerpieces of the EU ETS are National Allocation Plans (NAPs), which individual Member States (MS)...

This paper explores the incentives for energy efficiency induced by the European Union Emissions Trading Scheme (EU ETS) for installations in the energy and industry sectors. Our analysis of the National Allocation Plans for 27 EU Member States for phase 2 of the EU ETS (2008-2012) suggests that...