There are undeniable similarities between the proposed emissions auctioning scheme in the newly-released draft of the Waxman-Markey energy bill (H.R. 2454) and the approach adopted for allowance auctions in the ten-state cooperative arrangement in the Northeast, the Regional Greenhouse Gas Initiative (RGGI).

 

With little precedent to look to, it appears the framers of H.R. 2454 have taken a few pages from the recommendations of the RGGI auction design study, the basis for RGGI’s auction scheme.  This plan was designed by RFF researchers Dallas Burtraw and Karen Palmer, with Charles Holt and William Shobe of the University of Virginia, and Jacob Goeree of the California Institute of Technology.

 

The proposed plan incorporates a number of elements included in RGGI’s auction framework like adopting a single round, sealed bid, uniform price auction format that incorporates both current and future “allowance vintages,” giving purchasers the opportunity to plan for future allowance needs. Waxman-Markey also establishes a similar quarterly timeframe for holding auctions, limits on the percentage of allowances any one entity may purchase, and calls for a minimum reserve price for allowances sold in the auction (as Ray Kopp discussed in this post).