Auction Design and the Market for Sulfur Dioxide Emissions

47 Pages Posted: 12 Feb 1997 Last revised: 14 Sep 2022

See all articles by Paul L. Joskow

Paul L. Joskow

Alfred P. Sloan Foundation; Massachusetts Institute of Technology (MIT) - Department of Economics

Richard Schmalensee

Massachusetts Institute of Technology (MIT) - Sloan School of Management

Elizabeth M. Bailey

University of California, Berkeley - Haas School of Business

Date Written: September 1996

Abstract

Title IV of the Clean Air Act Amendments of 1990 created a market for electric utility emissions of sulfur dioxide (SO2). Recent papers have argued that flaws in the design of the auctions that are part of this market have adversely affected its performance. These papers incorrectly assume that trade can only occur at auctions, however. Our empirical analysis of the SO2 emissions market shows that the auctions have become a small part of a relatively efficient market and that the auction design problems that have attracted the most attention have had no effect on actual market prices

Suggested Citation

Joskow, Paul L. and Schmalensee, Richard and Bailey, Elizabeth M., Auction Design and the Market for Sulfur Dioxide Emissions (September 1996). NBER Working Paper No. w5745, Available at SSRN: https://ssrn.com/abstract=3726

Paul L. Joskow (Contact Author)

Alfred P. Sloan Foundation ( email )

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Richard Schmalensee

Massachusetts Institute of Technology (MIT) - Sloan School of Management ( email )

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Elizabeth M. Bailey

University of California, Berkeley - Haas School of Business ( email )

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2220 Piedmont Avenue
Berkeley, CA 94720
United States

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