Mind your Ps and Qs! Variable allowance supply in the US Regional Greenhouse Gas Initiative

Lana Friesen, Lata Gangadharan (), Peyman Khezr and Ian MacKenzie

Journal of Environmental Economics and Management, 2022, vol. 112, issue C

Abstract: We investigate the new institutional design for the US Regional Greenhouse Gas Initiative (RGGI). The scheme incorporates two allowance reserves that adjust the supply of allowances in the event of unexpectedly high or low allowance demand. These reserves are enacted if the clearing price breaches a predetermined set of trigger prices. Our experiment finds trigger prices act as focal points: the distribution of clearing prices is bimodal and aligns with the trigger prices. We find the existence of focal points can be explained by both the institutional design and subjects’ behavior. Further, decreasing the range between trigger prices increases total revenue but decreases allocative efficiency. The regulation is more sensitive to changes in trigger prices than reserve quantities.

Keywords: Supply reserve; Pollution allowances; Experiment (search for similar items in EconPapers)
JEL-codes: C91 C92 Q58 (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0095069622000109
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:jeeman:v:112:y:2022:i:c:s0095069622000109

DOI: 10.1016/j.jeem.2022.102620

Access Statistics for this article

Journal of Environmental Economics and Management is currently edited by M.A. Cole, A. Lange, D.J. Phaneuf, D. Popp, M.J. Roberts, M.D. Smith, C. Timmins, Q. Weninger and A.J. Yates

More articles in Journal of Environmental Economics and Management from Elsevier
Bibliographic data for series maintained by Catherine Liu ().