Using contests to allocate pollution rights

Nick Hanley, Tatiana Kornienko and Ian MacKenzie

No 2008-21, Stirling Economics Discussion Papers from University of Stirling, Division of Economics

Abstract: In this paper we advocate a new initial allocation mechanism for a tradable pollution permit market. We outline a Permit Allocation Contest (PAC) that distributes permits to firms based on their rank relative to other firms. This ranking is achieved by ordering firms based on an observable 'external action' where the external action is an activity or characteristic of the firm that is independent of their choice of emissions in the tradeable permit market. We argue that this mechanism has a number of benefits over auctioning and grandfathering. Using this mechanism efficiently distributes permits, allows for the attainment of a sec- ondary policy objective and has the potential to be more politically appealing than existing alte rnatives.

Keywords: Rank-order contests; pollution permits; initial allocation (search for similar items in EconPapers)
Date: 2008-10
New Economics Papers: this item is included in nep-ene and nep-env
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http://hdl.handle.net/1893/513

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Journal Article: Using contests to allocate pollution rights (2009)
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Persistent link: https://EconPapers.repec.org/RePEc:stl:stledp:2008-21

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