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

Paul Burke ()

CCEP Working Papers from Centre for Climate Economics & Policy, Crawford School of Public Policy, The Australian National University

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: abatement subsidy; adverse selection; emissions; climate; Australia (search for similar items in EconPapers)
JEL-codes: Q58 Q52 D82 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ene, nep-env, nep-pr~ and nep-ppm
Date: 2016-05
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https://ccep.crawford.anu.edu.au/sites/default/fil ... 2016-06/ccep1605.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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Persistent link: https://EconPapers.repec.org/RePEc:een:ccepwp:1605

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