Abstract: The direct sale of emissions allowances by auction is an emerging characteristic of cap-and-trade programs. This study is motivated by the observation that all of the major implementations of cap-and-trade regulations for the control of air pollution have started with a generous allocation of allowances relative to recent emissions history, a situation we refer to as a "loose cap." Typically more stringent reductions are achieved in subsequent years of a program. We use an experimental setting to investigate the effects of a loose cap environment on a variety of auction types. We find all auction formats studied are efficient in allocating emissions allowances, but auction revenues tend to be lower relative to competitive benchmarks when the cap is loose. Regardless of whether the cap is tight or loose, the different auction formats tend to yield comparable revenues toward the end of a series of auctions. However, aggressive bidding behavior in initial discriminatory auctions yields higher revenues than in other auction formats, a difference that disappears as bidders learn to adjust their bids closer to the cutoff that separates winning and losing bids.

Abstract: Federal policies intended to slow global warming would impose potentially significant costs on households, and the costs would vary depending on the policy approach used. This paper evaluates the effects of a carbon dioxide (CO2) cap-and-trade program on households in each of 11 regions of the country and sorted into annual income deciles. We find important variation in the incidence (the distribution of cost) of the policy. The most important feature that affects households is how the policy distributes the value created by placing a price on CO2 emissions. We evaluate five policy alternatives that yield results ranging from moderately progressive (expansion of the Earned Income Tax Credit and cap-and-dividend approaches) to moderately regressive (reduced income taxes and reduction in the payroll tax). To varying degrees, the allocation of the value of emissions allowances amplifies or mitigates the distributional impacts of placing a price on CO2.

Abstract: In countries where insurance and credit markets are thin or missing, production and consumption risks play a critical role in the choice and use of production inputs and adoption of new farm technologies. In this paper, we investigated impacts of chemical fertilizer and soil and water conservation technologies adoption on production risks, using a moment-based approach and two years of cross-sectional data. A pseudo-fixed-effect model was estimated to generate first, second, and third moments of farm production. Our results revealed that fertilizer adoption reduces yield variability, but increases the risk of crop failure. However, adopting soil and water conservation technology has no impact on yield variability, but reduces the downside risk of crop failure. The results underscore that the risk implications of farm technology adoption vary by technology type. Furthermore, policies that promote adoption of fertilizers should be complemented by desirable instruments that hedge against downside risk. In that respect, if properly implemented, the safety net program and the weather insurance programs currently piloted in some parts of Ethiopia are actions in the right direction.