Auctions - the Solution to Windmill Profits and End of all State Aid Problems?

Stefan Weishaar


After the unhappy closing of the of the United Nations Climate Change Conference in Copenhagen in December 2009, it is again time to examine what Europe is doing to prevent global warming. Already in 2005, the EU introduced the largest Emissions Trading System (ETS) in the world to curb greenhouse gasses. Following mixed experiences with the allocation of emission allowances on the basis of historical demand statistics (grandfathering) during the first two trading phases of the EU ETS, auctioning will become more important during the third trading phase. Auctions are often viewed as mechanisms to solve problems of windfall profits and State aid that have been an issue under the application of the ‘grandfathering’ system. In this article I present arguments that such a result is by no means a self-fulfilling prophecy. 


Climate Change, Copenhagen 2009

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Copyright (c) 2010 Stefan Weishaar

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