Price Discovery in Emissions Permit Auctions May 03, 2010 By William ShobeDallas BurtrawJacob GoereeCharles HoltErica MyersKaren Palmer Price Discovery in Emissions Permit Auctions Price Discovery in Emissions Permit Auctions Auctions are increasingly being used to allocate emissions allowances (“permits”) for cap and trade and common-pool resource management programs. These auctions create thick markets that can provide important information about changes in current market conditions. This paper reports a laboratory experiment in which half of the bidders experienced unannounced increases in their willingness to pay for permits. The focus is on the extent to which the predicted price increase due to the demand shift is reflected in sales prices under alternative auction formats. Price tracking is comparably good for uniform-price sealed-bid auctions and for multi-round clock auctions, with or without end-of-round information about excess demand. More price inertia is observed for “pay as bid” (discriminatory) auctions, especially for a continuous discriminatory format in which bids could be changed at will during a pre-specified time window, in part because “sniping” in the final moments blocked the full effect of the demand shock. Center for Economic and Policy Studies William Shobe Professor Shobe splits his time between the Batten School and UVa’s Weldon Cooper Center for Public Service, where he heads up the Center for Economic and Policy Studies. He also teaches a class in environmental economics for the UVa Economics Department. His current research includes emission market and auction design, environmental federalism, improved economic modeling of Virginia’s economy, state economic development incentives, and state economic forecasting. Read full bio Dallas Burtraw Jacob Goeree Charles Holt Erica Myers Karen Palmer Related Content William Shobe Emerging Issues in Decentralized Resource Governance: Environmental Federalism, Spillovers, and Linked Socio-Ecological Systems Research Federalism as an academic discipline studies how multilevel political jurisdictions interact, both vertically and horizontally. Environmental federalism shifts and expands the focus by concentrating on environmental goods, which are related to ecosystem services. This shift necessarily expands the inquiry to include investigation of how ecosystem services respond to changes in resource management by human governance institutions. From Zero to Hero?: Why Integrated Assessment Modeling of Negative Emissions Technologies Is Hard and How We Can Do Better Research Efforts by the United Nations and others to develop a coordinated global response to climate change rely heavily on an ensemble of Integrated Assessment Models (IAMs) to make projections linking human activities to climate outcomes (IPCC, 2014, 2018). IAMs are coupled models of the global economic and climate systems, first developed to represent fossil fuel emissions from the energy system (Reister and Edmonds, 1977), and later expanded to include land use change and forestry emissions, as well as non-CO2 emissions (Di Vittorio et al., 2014). Batten Professor Tells Northam That Decarbonization By 2050 is ‘Achievable and Affordable’ News As part of the Virginia Clean Energy Summit on Tuesday, Batten professor William Shobe outlined how it is feasible for Virginia to “decarbonize” the state’s economy by 2050. Summer Savior: Students Flocking to Weldon Cooper Center's Clean Energy Initiative News Upon realizing the vast number of students who were suddenly losing summer jobs and internships, the Cooper Center leapt into action. Batten Professor Bill Shobe and his team made the decision to take on as many interns for its Virginia Clean Energy Project as it could possibly handle.