An experimental study on the efficiency of auctioning as first-allocation mechanism for emission

Abstract

The EU ETS sets national quotas on the pollutant CO2 and allows for the emissions trading, since then many are the researchers who have tested different mechanisms and methods to first-allocation (auction or grandfathering) for pollutant allowances. In this paper by mean of experimental methods is tested the auction efficiency when number of firms increases. They (the firms) under-report their maximal emission when permits are auction-off, as is predicted by theoretical model.