The US SO2 Auction and Enviromental Regulation

Jan Lien Christensen and Gert Svendsen
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Jan Lien Christensen: AKF, Institute of Local Government Studies - Denmark, Copenhagen

Homo Oeconomicus, 1999, vol. 16, 191-204

Abstract: The US Acid Rain Program (ARP) is now well-established. The ARP relies on tradable permits and includes an annual revenue-neutral SO2áauction. Has this auction been an important factor in establishing low transaction costs and a successful market? In answering this question, we first compare the price signals from the SO2áauction to those found in the market. Secondly, we try to explain empirical outcomes by analyzing strategic incentives and the number of buyers and sellers in the auction. The policy recommendation is that the non-discriminative SO2áauction is a very useful tool for kick-starting an immature market and should as such be applied by policy makers, for example, when establishing future CO2ámarkets.

Date: 1999
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Persistent link: https://EconPapers.repec.org/RePEc:hom:homoec:v:16:y:1999:p:191-204

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