Munich Personal RePEc Archive

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

Hlavac, Marek (2010): The Distribution of European Union Allowances (EUAs): Windfall Profits, Free Allocation and Auctions.

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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.

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