Note: [] Stefan E. Weishaar and Edwin Woerdman are Associate Professors of Law and Economics at the University of Groningen, Faculty of Law, Department of Law and Economics, <s.e.weishaar@rug.nl> (Stefan E. Weishaar), <e.woerdman@rug.nl> (Edwin Woerdman). The authors wish to thank Oscar Couwenberg for helping to draw the insightful figure, as well as the journal's editor-in-chief for his useful comments and questions on an earlier version of this paper.
Note: [] Stefan E. Weishaar and Edwin Woerdman are Associate Professors of Law and Economics at the University of Groningen, Faculty of Law, Department of Law and Economics, <s.e.weishaar@rug.nl> (Stefan E. Weishaar), <e.woerdman@rug.nl> (Edwin Woerdman). The authors wish to thank Oscar Couwenberg for helping to draw the insightful figure, as well as the journal's editor-in-chief for his useful comments and questions on an earlier version of this paper.
Abstract: We analyse whether Auction Regulation 1031/2010/EU under the EU ETS efficiently addresses market manipulation. Two strategies for manipulating the allowance auction market are considered, namely demand reduction and signalling. In the Auction Regulation the legislature has opted for the sealed-bid uniform-price auction. This auction-mechanism design addresses in-auction signalling, but does not eliminate all incentives for demand reduction. For this reason the legal framework should ensure efficient monitoring and enforcement with a view to preventing market abuse. However, we have observed several inefficiencies, due to (a) concurring competences of enforcement agents, (b) inconsistencies in the enforcement schedules, and (c) imbalances in the mix of public and private enforcement. As a whole, though, the framework is nuanced, with the result that some of the inefficiencies are likely to be addressed. We conclude that market abuse in EU ETS auctions could be prevented more efficiently through improving the legal enforcement structure.
DOI: 10.3233/CL-120066
Journal: Climate Law, vol. 3, no. 3-4, pp. 247-263, 2012
