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Appears in Collections:Economics Working Papers
Peer Review Status: Unrefereed
Title: Using contests to allocate pollution rights
Author(s): Mackenzie, Ian A
Hanley, Nicholas
Kornienko, Tatiana
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Citation: Mackenzie IA, Hanley N & Kornienko T (2008) Using contests to allocate pollution rights. Stirling Economics Discussion Paper, 2008-21.
Keywords: Rank-order contests
pollution permits
initial allocation
JEL Code(s): D44
Issue Date: Oct-2008
Series/Report no.: Stirling Economics Discussion Paper, 2008-21
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 alternatives.
Type: Working or Discussion Paper
Affiliation: University of Stirling
University of Edinburgh

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