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Auctioning vs. Grandfathering in Cap-and-Trade Systems with Market Power and Incomplete Information
2013
Social Science Research Network
We present a model with a cap-and-trade system in which there is imperfect competition and some firm has market power. In this framework, we study the different implications, in terms of efficiency, of the system used for the initial allocation of permits, either an auction or grandfathering. We show that, if the firm with market power in the secondary market also holds such a power in the auction, then the auction always generates more abatement costs than a grandfathering system, but this is
doi:10.2139/ssrn.2362888
fatcat:xlzou74c3jg4deolc22vfkjftq