The initial distribution of emissions allowances is usually thought to be independent of the emissions outcome, but free allocation can affect the efficiency and fairness of allowance trading. Inefficiency may result from thin allowance markets, poor price discovery, and regulatory or...

Policy makers reformed the European Union (EU) Emission Trading System (ETS) to address low prices and price volatility. They reduced the cap and strengthened the Market Stability Reserve (MSR). The effectiveness of these reforms hinges on path dependency of emission and abatement technology....

Policy makers reformed the European Union (EU) Emission Trading System (ETS) by tightening the cap and strengthening the Market Stability Reserve (MSR) the market’s dynamic supply control mechanism. The capacity of the reformed EU ETS to deliver on the reform objectives is to be evaluated on...

The first half of the paper provides a brief overview of the European Union’s Emission Trading System (EU ETS), and discusses how emission allowances have been allocated during the first two phases of the trading scheme. I then discuss the effects of auctioning off more emission allowances...

Many scholars assert that "cap and trade" is an appropriate strategy for addressing climate change. Some economists have argued that auctions of greenhouse gases should be an integral part of any cap-and-trade mechanism. These economists suggest that auctions can efficiently distribute emissions...