Further Experimental Investigations into Marketable Emissions Permits

Abstract

"This paper examines the results of experiments designed to study various aspects of tradable emissions permits as set forth by the Clean Air Act of 1991. In particular, this paper develops an understanding of some of the results that we attained in our experimental work in this area at the Universities of Arizona and Colorado. In these experiments subjects acted as managers of firms that must trade emissions permits. After an initial allocation of permits, subjects were allowed to trade them in both an 'informal' double auction and are 'formal' revenue neutral auction or in some sessions just the 'formal' auction. Further, some sessions allowed subjects to hold permits across rounds for later use (intertemporal banking of permits), while others did not."