Design, Performance, and Interstate Collaboration: Insights from the Regional Greenhouse Gas Initiative
Regional & Federal Studies. 22(4):475-498.
Posted: 6 Nov 2011 Last revised: 20 Jan 2015
Date Written: 2012
Given pressure to act on climate change, nations have started using market-based approaches for reducing greenhouse gas (GHG) emissions. Cap and trade systems for reducing GHG are strongly debated. Policy designers must allocate emissions allowances effectively to ensure successful cap and trade systems; for example, some argue that the European Union’s Emissions Trading Scheme has underperformed due to poor allowance distribution. We apply insights from auction design theory to analyze the performance of the Regional Greenhouse Gas Initiative (RGGI) emissions allowance auctions, and show how RGGI could serve as a model for a national cap and trade system for the United States.
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