The Staff Working Group has engaged auction design experts to test potential auction design options, and identify potential design challenges and solutions. Staff identified a number of specific issues for evaluation prior to finalizing a recommended auction design. These issues include the availability of allowances to affected sources in an open versus limited-participation auction, interplay with a secondary allowance market, interplay with other carbon markets, and the potential for collusion and/or market manipulation by large bidders.

> Download a copy of the “Final Report (Phase-II)” (Pdf Format)
> Download a copy of the “Draft Phase-I Report” (Pdf Format)
> View Comments Submitted
> Submit comments

Auction Design Research

In March 2007, the New York Energy Research and Development Authority (NYSERDA), on behalf of RGGI-participating states, engaged a research team led by the University of Virginia and Resources for the Future (RFF) to evaluate regional auction design options and make recommendations to the Staff Working Group and Agency Heads for the specifications of a regional RGGI allowance auction. The outcome of this research will provide recommendations at a level of specificity that would allow participating states to jointly implement an auction platform and administer an auction, pursuant to design requirements and rules specified by RGGI participating states.

Research Methodology

The research team is using experiments (mock auctions in a laboratory setting) to test the performance of a number of auction formats considered good candidates for use in a carbon allowance market. The research team will supplement experimental results with additional analysis of academic literature and other experiences with allowance auctions.

Project Scope and Timing

The research project has been divided into two phases. Phase-I focuses on recommending a preferred auction format. The experiments in this phase factored in asymmetries in the cost of compliance for different types of facilities (e.g., coal vs. natural gas). In this phase, the researchers conducted experiments and other analysis on the following auction types:

• Discriminatory sealed-bid
• Uniform price sealed-bid
• English clock
• Dutch
• “Shot clock”

> Download a copy of the “Draft Phase-I Report” (Pdf Format)
> Review comments on "Draft Phase-I Report”

Phase-II of the project focuses on developing more detailed recommendations for auction mechanics that should enhance the performance of the recommended auction format identified in Phase-I. For instance, the research team will evaluate, through experimentation and literature review, the impact of the following on the performance of the recommended auction format identified in Phase-I:

• Participation by “non-compliance entities” (entities not subject to RGGI)
• Secondary allowance markets
• Allowance banking
• Reserve prices
• The presence of varying allowance distribution mechanisms across RGGI
• Potential market power and collusion
• Revealing bid information after the auction

> Download a copy of the “Final Report (Phase-II)” (Pdf Format)

Submission of Comments

The Staff Working Group is soliciting comments on the auction design research report. Submitted comments will be posted on this site. To receive full consideration, comments on the Final Report should be submitted by November 15, 2007. Written comments may be submitted in Word or PDF formats to: rggicomm@gw.dec.state.ny.us