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Undermined by adverse selection: Australia’s Direct Action abatement subsidies

Paul Burke ()

No 249524, Working Papers from Australian National University, Centre for Climate Economics & Policy

Abstract: This paper examines economic challenges faced by Australia’s Direct Action abatement subsidy scheme. Introduced in 2014, the scheme operates by reverse auction, funding projects voluntarily proposed by the private sector. Because the government cannot know true project counterfactuals, the lowest auction bids are likely to often be non-additional “anyway” projects. The scheme is hence likely to exhibit a systematic skew toward low-quality abatement. The paper presents a model of the adverse selection problem and describes the early experience with Direct Action. A discussion of a way forward is also provided.

Keywords: Environmental Economics and Policy; Resource /Energy Economics and Policy (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-env and nep-ppm
Date: 2016-04
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http://ageconsearch.umn.edu/record/249524/files/ccep1605.pdf (application/pdf)

Related works:
Journal Article: Undermined by Adverse Selection: Australia's Direct Action Abatement Subsidies (2016) Downloads
Working Paper: Undermined by adverse selection: Australia’s Direct Action abatement subsidies (2016) Downloads
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