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The Distribution of European Union Allowances (EUAs): Windfall Profits, Free Allocation and Auctions

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  • Hlavac, Marek

Abstract

The first half of the paper provides a brief overview of the European Union’s Emission Trading System (EU ETS), and discusses how emission allowances have been allocated during the first two phases of the trading scheme. I then discuss the effects of auctioning off more emission allowances during Phase III of the EU ETS. I conclude that such a change would reduce the windfall profits of the initial allowance holders, and provide additional revenues that participating governments could use to support a variety of policies, some of which I discuss.

Suggested Citation

  • Hlavac, Marek, 2010. "The Distribution of European Union Allowances (EUAs): Windfall Profits, Free Allocation and Auctions," MPRA Paper 24242, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:24242
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    File URL: https://mpra.ub.uni-muenchen.de/24242/1/MPRA_paper_24242.pdf
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    References listed on IDEAS

    as
    1. R. H. Coase, 2013. "The Problem of Social Cost," Journal of Law and Economics, University of Chicago Press, vol. 56(4), pages 837-877.
    2. Cameron Hepburn & Michael Grubb & Karsten Neuhoff & Felix Matthes & Maximilien Tse, 2006. "Auctioning of EU ETS phase II allowances: how and why?," Climate Policy, Taylor & Francis Journals, vol. 6(1), pages 137-160, January.
    3. Skaperdas, Stergios, 1992. "Cooperation, Conflict, and Power in the Absence of Property Rights," American Economic Review, American Economic Association, vol. 82(4), pages 720-739, September.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    environmental economics; emissions trading; European Union; windfall profits;
    All these keywords.

    JEL classification:

    • Q5 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics
    • P26 - Political Economy and Comparative Economic Systems - - Socialist and Transition Economies - - - Property Rights

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