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Department of Economics, Stockholm University Research Papers in Economics, Department of Economics, Stockholm University

No 2002:11:
Comparing Permit Allocation Options: The Main Points

Peter Bohm

Abstract: In discussions about the policy design of domestic emission trading, e.g., when implementing the

Kyoto Protocol, the two permit allocation alternatives auctioning and allocation gratis

(grandfathering) are often pitted against each other as representing utopian cost-effectiveness and

political realism, respectively. In this note, an attempt is made to extract the main points of a

comparison between the two options with respect to efficiency and distribution.

Keywords: Domestic carbon emissions trading; permit allocation; grandfathering; auctioning; cost effectiveness; Kyoto protocol; (follow links to similar papers)

JEL-Codes: Q25; Q28; (follow links to similar papers)

7 pages, April 20, 2002

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