Equal burdens, greater reductions: free allocation beats auctioning in emissions trading schemes

초록

This study shows that free allocation in emissions trading schemes can achieve greater greenhouse gas reductions than auctioning, even when compliance costs are equal. While auctioning is often favoured for its transparency and revenue-generating potential, our analysis shows that free allocation, despite its perceived inefficiencies, can lead to superior abatement outcomes. By comparing the environmental impacts of both allocation methods under identical economic conditions, we demonstrate the critical role of allocation design in determining the effectiveness of carbon markets. These findings underscore the need to balance environmental outcomes with economic and political considerations in ETS policy decisions.

키워드