On the Long-Run Efficiency of Auctioned vs. Free Permits

Catherine Kling and Jinhua Zhao

Staff General Research Papers Archive from Iowa State University, Department of Economics

Abstract: When marketable emission permits affect the entry and exit decisions of competitive firms, all permits should not be distributed free of charge. Depending on the nature of the pollutant, an optimal share of the permits should be auctioned with others freely distributed to ensure long-run efficiency. All of the permits should be auctioned for global pollutants, but for local pollutants, some of the permits should be free.

Date: 2000-11-01
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Published in Economics Letters, November 2000, vol. 69 no. 2, pp. 235-38

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Journal Article: On the long-run efficiency of auctioned vs. free permits (2000)
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