Discussion Paper No. 515

PRICE DISCLOSURE, MARGINAL
ABATEMENT COST INFORMATION
AND MARKET POWER
IN A BILATERAL GHG EMISSIONSTRADING EXPERIMENT
Yoichi Hizen
andTatsuyoshi Saijo

August 2000

The Institute of Social and Economic Research
Osaka University
6-1 Mihogaoka, Ibaraki, Osaka 567-0047, Japan

Price Disclosure, Marginal Abatement Cost Information and Market Powerin a Bilateral GHG Emissions Trading Experiment#

Yoichi Hizen*1, *2
andTatsuyoshi Saijo**1, **2

August, 2000

# This research was partially supported by CREST (Core Research for Evolutional Science andTechnology) of the Japan Science and Technology Corporation (JST). We also thank Professor
James C. Cox and participants of the CREST workshop for helpful comments and discussions,and Dr. Yasuko Kawashima of the National Institute for Environmental Studies in Japan forproviding marginal abatement cost information.
*1 Graduate School of Economics, Osaka University, Toyonaka, Osaka 560-0043, Japan*2 Research Fellow of the Japan Society for the Promotion of Science**1 Institute of Social and Economic Research, Osaka University, Ibaraki, Osaka 567-0047, Japan**2 CREST, Japan Science and Technology Corporation, 3-12-40 Hiroo, Shibuya, Tokyo 150-0012,
Japan

ABSTRACTWe conducted an experiment to examine the performance of the bilateral
trading institution in GHG emissions trading. First, we found that the efficiency ofbilateral trading is quite high, regardless of the disclosure or closure of contracted priceand/or marginal abatement cost curve information. Second, marginal abatement costs
are equalized over time. Third, on the other hand, contracted prices did not converge
to the competitive price over time. Fourth, subjects who had market power did not use
it.
Journal of Economic Literature Classification Numbers: C92, Q31, Q38

Correspondent:
Tatsuyoshi Saijo
Institute of Social and Economic Research
Osaka University
Ibaraki, Osaka 567-0047
Japan
Phone 01181-6 (country & area codes)
6879-8571 (office)/6878-2766 (fax)E-mail: saijo@iser.osaka-u.ac.jp

1. Introduction
To prevent the global warming, the discussion on how to control the total amountof greenhouse gases (GHG's) has started among countries in the late of 1980's. At thethird session of the Conference of the Parties (COP3) to the United Nations Framework
Convention on Climate Change (UNFCCC) at Kyoto in December, 1997, the Kyoto
Protocol was adopted, which was the first agreement on the quantified GHG emission
limitation. It assigns each Annex B country the quantity she should comply with, andcalls for these countries to reduce their overall emissions by at least five percent below
1990 levels in the commitment period 2008 to 2012. To assist the countries in achieving
compliance, the Protocol authorizes three major mechanisms, that is, emissions trading,joint implementation and the Clean Development Mechanism. The details of
mechanisms, however, remained to be elaborated. Designing these mechanisms is anurgent task since they should start working by 2008 at the latest. Among them, this paper
focuses on designing desirable institutions for GHG emissions trading through the use ofexperimental economics. 1
Although we know "roughly" that introducing a market for GHG emissions
achieves the lowest cost to reduce them, we do not know how the emissions should betraded in the market. As a first step toward designing the GHG emissions trading
institution, this paper deals with bilateral trading. There are two main backgrounds tostart with bilateral trading. First, the participants in the GHG emissions trading arecountries. Thus, bilateral negotiations between the government officials of two countries
can be the major style of trading. Second, we already have an example of bilateral tradingused as an emissions trading institution. In the U.S.A., the acid-rain control program in

1 For recent experimental results in emissions trading, see Muller and Mestelman (1998) and Godby,

Mestelman and Muller (1998).
1the Clean Air Act Amendments of 1990 introduced tradable emission allowances forsulfur dioxide, and most of the trades have been carried out through bilateral trading.
This program attained the greater reduction of sulfur dioxide emissions than the assigned
amount. However, we cannot conclude from this observation that bilateral trading works
best as an emissions trading institution because there were other factors which might leadto this great reduction, for example, the permission for banking, the reduction of marginal
abatement costs, and the combined use of annual auctions. We cannot compare the resultof this program with the case of competitive equilibrium or the case of other institutions,
without the firms' abatement cost information or the data from other institutions. Thus,
the experiment on bilateral trading also provides a basis for evaluating sulfur dioxide
allowance trading in the U.S.A. 2
The bilateral trading examined in this paper has a special feature, which we callthe dual role property of a trader. That is, each participant in the institution can be a buyer
and a seller depending on the allowance price. This is a natural property of real emissions
trading, but each subject is assigned to be either a buyer or a seller in most previous
experiments in emissions trading. Recently, Bohm (1997) employed this property, andreported a bilateral trading experiment among four teams consisting of experienced public
officials or experts appointed by the Energy Ministries. Each team represented one of thefour Nordic countries, and had some information on the marginal abatement cost curvesof all teams. 3 The asks and bids were exchanged by fax without revealing thisinformation to other teams. It took four days to complete this experiment. The resulting

2 Some evaluation of sulfur dioxide emissions trading has just started. See, for example, Schmalensee et.

al. (1998) and Stavins (1998).

3 Bohm distinguished two concepts of marginal abatement cost curves. Technical marginal cost curves are

based upon scientific knowledge. He assumed that each team knew the others' technical cost curves very well,
but did not know social marginal abatement cost curves. Social abatement costs include considerations of realworld political constraints concerning employment and distribution effects. Cost curves used in his
experiment were social ones. In our experiment, these two concepts coincide.
2

prices were very close to the competitive equilibrium price and its efficiency was 97%,
which is surprisingly high.
Following Bohm's important experiment, we designed a bilateral trading
experiment with two controls: (i) disclosure or closure of contracted prices, and (ii)disclosure or closure of marginal abatement cost curves. Thus, there are four different
treatments. In this way, we can understand which information treatment would be
effective for bilateral trading to work as a GHG emissions trading institution.
We conducted two sessions for each treatment. The first finding is that theefficiency of the eight sessions is very high, regardless of information closure ordisclosure. That is, disclosure of contracted prices and/or marginal abatement cost
information does not improve efficiency. It was more than 99% in 6 sessions, and 98%
and 92% in the remaining sessions. This finding contrasts strikingly with the widely
accepted view on bilateral trading, that is, (i) it would be inefficient in the sense that somedissatisfied traders could not be eliminated due to mismatching, and (ii) the revelation ofcontracted prices would improve its efficiency. 4 Second, marginal abatement costs areequalized in most of the sessions except for the 92% efficiency session. Third, thecontracted prices did not converge to the competitive equilibrium price. This observation
is different from Bohm's. Fourth, subjects who could exercise market power did not usethat power. In each session, we had six subjects who were supposed to represent Russia,
Ukraine, U.S.A., Poland, EU, and Japan. In our setting, only the U.S.A. had market power,
and the subjects who were assigned this role did not reduce their quantity demanded inorder to lower the price.

4 These views are not based upon either economic theory or empirical evidence. Feldman (1973) shows that

allocations through bilateral trading can attain Pareto efficiency in a finite number of steps.
3

The paper is organized as follows. In the next section, we describe theexperimental design in detail, and section 3 presents the results. In section 4, we discuss
why efficiency is so high and consider the implication of disclosure of contracted prices.
Section 5 discusses the future agenda.

2. Experimental Design
The experiment has two controls: (i) disclosure or closure of contracted prices, and(ii) disclosure or closure of marginal abatement cost curves. Therefore, there are four
treatments. Repeating the same treatment twice yields eight sessions. In what follows, "O"
represents "disclosure" and "X" represents "closure". For example, "OX2" indicates session
2 in the price disclosure, marginal cost curve closure treatment. That is, the first digit
indicates price information, the second digit marginal cost curve information, and the last
the session number.
We recruited at least six students for each session by campus-wide advertisementat Osaka University during October, 1998. These students were told that there would be
an opportunity to earn money in a research experiment. None of them had priorexperience in a bilateral trading experiment. It took approximately 160 minutes for eachsession. The mean payoff per subject was $31.25 ($1=115 yen). The maximum payoff was$66.09, and the minimum payoff was $17.39.
---------------------------------Figure 1 is around here---------------------------------Let us describe an "OO" session. Eight subjects were seated at desks in a relatively
large room and listened to a tape-recorded voice giving instructions. This instruction part
took about 45 minutes. In this part, each subject received a sample graph (see Figure 1).

4

The upper half is a sample marginal abatement cost curve. Each subject was told that theinitial position is at 0. 5 If the subject moves to the right, she buys the allowance and earns
benefits, and if she moves to the left, she sells the allowance and obtains a profit. All
possible situations were depicted in the lower half of Figure 1. After receiving
instructions on how to transact with other subjects, all subjects took an examination tocheck their understanding of the instructions. The best six subjects continued theexperiment, and the rest were asked to leave the room with $13. 6 Then each subject was
assigned an identification number from 1 to 6 and, at the same time, each subject received
her own marginal abatement cost curve. In the "OO" session, each subject received Figure
2 with all six abatement cost curves, and had fifteen minutes to examine it (i.e., marginal
abatement cost curve disclosure). 7 Then bilateral trading started. Since every subject hada tag with an identification number, subjects could identify other subjects' marginal
abatement cost curves. Every subject could move around the room freely to find a subject
with whom to transact. During negotiations, subjects were not allowed to talk. Only
numbers (price and quantity), and "yes" and "no" symbols on their negotiation sheets,
were exchanged in order to avoid information leakage. Once a pair reached anagreement, they reported the price and quantity to an experimenter, who announced thesenumbers on the blackboard (i.e., contracted price disclosure). The maximum time fornegotiations was 60 minutes, and subjects could end their negotiations early if all subjects
agreed to it. The full 60 minutes was used in all sessions except "XO2." In this session,
subjects quit at 58:30.
---------------------------------Figure 2 is around here---------------------------------5 We implicitly presume that position 0 is the position where each country attains the goal required by

the Kyoto Protocol. In other words, our experimental setting asks what kind of trading should be donein order to achieve that goal. That is, we did not address the non-compliance issue.
6 The number of subjects who actually participated in bilateral trading was 6. Sessions where 8 subjects
participated at the outset were "OO1", "OO2", and "XO2", sessions with 7 subjects were "OX2", "XX1", and"XX2", and sessions with 6 subjects were "OX1" and "XO1".
7 Since information on the marginal abatement cost curves around 2010 is hard to obtain, we draw thesecurves based upon some information provided by Dr. Kawashima.
5

During the experiment, we did not use any country names or the term "emissions
trading." That is, subjects faced a situation where trading of an abstract commodity was
conducted with an abstract price.
3. Experimental Results
3.1 Efficiency of Bilateral Trading
Let us define the efficiency of bilateral trading as follows:
Sum of benefit and profit of each subject
Sum of benefit and profit at market equilibrium
In our design, the competitive equilibrium price ranges from 118 to 120. We regard 119,
which is the midpoint between 118 and 120, as the competitive equilibrium price. At thisprice, the total amount of benefit and profit (that is, the maximum amount that these six
subjects can enjoy) is 6990. In Table 1, the top row indicates the name of the sessions, theleft column shows the I.D. numbers of subjects, and the numbers in parentheses are theirbenefits or profits at the competitive equilibrium price. In each cell, the upper figure is theactual benefit or profit that the subject earned, and the lower figure is the efficiency of thissubject. For example, the 0.732 figure for subject 1 in the "OO2" session is the ratio
between 1870 and 2555, which we call individual efficiency.

6

OO1

OO2

OX1

OX2

XO1

XO2

XX1

XX2

1420
1870
960
1710
1510
0.556 0.732 0.376 0.669
0.591
1140
914
360
1665
1320
0.884 0.709 0.279 1.291
1.023
685
683
2060
372
1846
1.123 1.120 3.377 0.610
3.026
520
570
850
530
500
1.333 1.462 2.179 1.359
1.282
800
1105
1300
755
-150
1.290 1.782 2.097 1.218 -0.242
2425
1800
1450
1844
1400
1.590 1.180 0.951 1.209
0.918
6990
6942
6980
6876
6426
1 0.993 0.999 0.984
0.919

1100
0.431
940
0.729
615
1.008
555
1.423
1080
1.742
2700
1.770
6990
1

1460
0.571
1536
1.191
583
0.956
910
2.333
81
0.131
2390
1.567
6960
0.996

1600
0.626
2370
1.837
550
0.902
500
1.282
150
0.242
1800
1.180
6970
0.997

Subject No.

1(2555)(Russia)2(1290)(Ukraine)3(610)(U.S.A.)
4(390)(Poland)5(620)(EU)
6(1525)(Japan)Sum(6990)

Table 1. Efficiency of Bilateral Trading

As Table 1 shows, the efficiency of each session is quite high, except for "XO1."
The reason for the low efficiency level in this session is that subject 5 traded with othersubjects even though she suffered a loss. Individual efficiencies are quite different evenfor the same subject number. Statistical tests show that Russia consistently earned a much
lower profit than that of the competitive equilibrium and Poland earned a greater profit
than that of the competitive equilibrium. The efficiency of the other countries is close toone. As we discuss later, the only country that had some market power was the U.S.A.
We still do not understand why Russia and Poland deviated from the competitive
equilibrium efficiency and why the U.S.A. did not use its market power.
---------------------------------1
Figure 2 is around here2---------------------------------Figure 2

1shows efficiency changes over time. After sixteen minutes, the2efficiency in all sessions except for session "XX2" was greater than 80%, and it was morethan 90% in 6 sessions of 8 after 25 minutes. Efficiency usually is monotonicallyincreasing, but in session "OX2" efficiency moved up and down. This was due to the fact

7

that one subject bought allowances at a loss, but sold it at a relatively high price.
Summarizing these findings, we have:
Observation 1. (i) The efficiency of bilateral trading is almost one, regardless of closure ordisclosure of price and marginal abatement cost information.
(ii) Russia's efficiency is low, Poland's efficiency is high, and the efficiency of the other countries isclose to one.
(iii) The efficiency in 6 sessions of 8 was more than 90% after 25 minutes.

From this observation, high efficiency seems to be an intrinsic property of bilateral trading
under the dual role property.

3.2 Contracted Prices in Bilateral Trading
Figures 3-1 and 3-2 show contracted prices and quantities over time. The green
horizontal line in each small graph shows the competitive equilibrium price range of 118120. The left-hand side number of a square is the seller's subject number, the right-handside number is the buyer's subject number, and the number under the square is thecontracted quantity. If the variance of the last three contracted prices is significantly
smaller than the variance of the first three prices, then we say that the contracted pricesequence converges. We find the convergence of contracted prices in five of eight
sessions, but no information disclosure effect is observed. Similarly, Figures 4-1 and 4-2
show bids and asks over time. A square denotes an ask, and a triangle a bid.
-----------------------------------------------------------------Figures 3-1, 3-2, 4-1, and 4-2 are around here------------------------------------------------------------------

8

Observation 2. (i) Contracted average prices in the "XX" sessions (closure of prices and closureof marginal abatement cost curves) roughly equal the competitive equilibrium price, but thevariances of prices in the "XX" sessions are larger than those of the rest.
(ii) Average prices cannot be said to equal the competitive equilibrium price in sessions other thanthe "XX" sessions.
(iii) The average price of the last three contracts is not equal to the competitive equilibrium price inany session.
(iv) The convergence of contracted prices is found in five of eight sessions, but no information
disclosure effect on convergence is observed.

By the nature of bilateral trading, the price contracted by a pair of subjects is determinedby negotiation. Even though several other contracted prices have already beenannounced, a pair of subjects cannot reach an agreement if either of them rejects theseprices. For this reason, the competitive equilibrium price cannot play the role of thestandard of trade.

3.3 The Effect of Disclosure of Contracted Price and Marginal Abatement Cost Curve
Information
The effect of disclosure of contracted prices can be calculated by comparing the"OO" and "XO" sessions, and the "OX" and "XX" sessions. Since the variances ofcontracted prices in sessions "OX1" and "OX2" cannot be said to be the same, we omitted
these sessions from the comparison. Under this constraint, we compare the "OO" sessions
with the "XO" sessions. No differences are observed among the variances of thesesessions.

9

For the same reason mentioned in the above paragraph, we compare the "XO"
sessions with the "XX" sessions to measure the effect of disclosure of marginal abatement
cost curve information. We find that the variance of contracted prices in the "XO" sessions
is smaller than in the "XX" sessions. Summarizing these facts, we have:

Observation 3. (i) Assuming that each subject knows other subjects' marginal abatement cost
curves well, the disclosure of contracted prices does not have any impact on the variance ofcontracted prices.
(ii) Under the closure of contracted prices, the disclosure of marginal abatement cost curves
reduces the variance of contracted prices.

3.4 Equalization of Marginal Abatement Costs over Time
Behind efficiency, we can see how marginal abatement costs changed over time.
Figures 5-1 and 5-2 show their change in each session. If a subject sells allowances andreaches the kink on the marginal cost curve, we choose the right-hand side cost figure,and if a subject buys allowances and reaches the kink on the marginal cost curve, wechoose the left-hand side cost figure. Due to the step-function nature of our marginal
abatement cost curve, we must be careful when evaluating marginal costs. For example,
the marginal abatement cost of Russia in session "OO1" was 90 after 25 minutes. Checking
the raw data, we find that Russia sold exactly 55 units of emissions allowance in 25
minutes. Therefore, if the subject wanted to sell one more unit, its marginal abatement
cost would have been 120 (see Figure 2). Taking account of this fact, we have:

Observation 4. Except for the EU subject in session "XO1," the marginal abatement costs of all
subjects approach the competitive equilibrium price, but the contracted prices do not.
10

--------------------------------------------------Figures 5-1 and 5-2 are around here--------------------------------------------------3.5 Market Power Issue
In order to understand how much market power a country has, we need anaggregate excess demand curve of all subjects regarding marginal abatement cost curves
as the excess demand curves for emissions allowances. After careful examination, we findthat the only country that has market power in our design is the U.S.A. Table 1 showsthat the benefits of the U.S.A. were more than three times the benefit at the competitive
equilibrium in two sessions of eight. A statistical test shows that the U.S.A. did not
exercise market power in the experiment. Most probably, the subjects could not exploit
the marginal abatement cost curve information to use such market power.

4. Discussions
Let us think about how high efficiency can be promoted by the dual role property,
that is, each country can buy and sell the allowance depending on the price. Consider thefollowing simple demand and supply curves with two sellers and two buyers. Each seller
has just one unit of a good. On the other hand, each buyer wants to buy just one unit of
the good. Apparently the competitive equilibrium price must be between 4 and 7, and thesocial surplus becomes 8. If buyers can only buy and sellers can only sell, a mismatch caneasily occur. Consider a pair in which the buyer's value is 10 and the seller's cost is 7. Ifthey trade with each other, the surplus is 3. Consider another pair in which the buyer'svalue is 4 and the seller's cost is 2. The surplus of this pair is 2 and hence the sum of thesurplus is 5, which is less than 8. After these trades, no mutually beneficial trade will
occur. Now consider the case in which everyone can buy and sell. After these trades, the11buyer whose value is 4 has one unit of the good and hence she can sell it. Since the seller
whose cost is 7 does not have any good, he can buy it. If this pair trades with each other,
they can enjoy 3 units of surplus, so that the total surplus becomes 8. Actually, startingfrom any trading pair, we can find a path that leads to a Pareto efficient allocation.

Price
12
10
8

10

7

6
4
2
0

2

4

1

2

Quantity

Figure 6. Efficiency of Bilateral Trading
The experiment did not show any significant effects of disclosure of contracted
prices on the variance in bilateral trading. This does not necessarily imply that the closureof contracted prices is better than disclosure. First, if the disclosure or closure ofcontracted prices does not matter, there is no reason why they should be hidden.
Although the experimental results did not show any significant difference, something
unexpected might occur in future emissions trading. For this safety reason, transactions
should be undertaken in public. Second, the transaction of GHG emissions allowances is
not a truly private economic activity. As it would affect absolutely everyone, it should bedone in public.

5. Concluding Remarks

12In this experiment, it was found that, first, the efficiency of bilateral trading isquite high, regardless of the disclosure or closure of contracted prices and/or marginal
abatement cost curve information. That is, high efficiency seems to be an intrinsic
property of bilateral trading under the dual role property. Second, marginal abatement
costs are equalized over time. Third, on the other hand, contracted prices did notconverge to the competitive price over time. Fourth, subjects who had market power did
not use it.
We used just six subjects in each session. If the number of participants increases,
the number of possible matchings increases with the square order of the number ofparticipants. That is, if there are many participants in bilateral trading, they cannot
communicate well through matching. Therefore, the number of subjects is an open
question to be explored.
Our experiment is a prelude to several more experiments that aim at designing theentire emissions trading institutions. In order to provide a solid basis for such a design,
we plan to conduct the following: (1) Oral double auction experiment, (2) Banking
experiment, (3) Non-compliance experiment, (4) Liability experiment and (5) Market
power experiment.

13

REFERENCES
Bohm, Peter, A Joint Implementation as Emission Quota Trade: An Experiment among Four
Nordic Countries, Nord 1997:4 by Nordic Council of Ministers, June, 1997.
Feldman, Allan M., "Bilateral Trading, Processes, Pairwise Optimality, and Pareto
Optimality," Review of Economic Studies 40(4), Oct. 1973, pp. 463-73.
Godby, Robert W., Stuart Mestelman, R. Andrew Muller, "Experimental Tests of Market
Power in Emission Trading Markets," mimeo., September, 1998.
Muller, R. Andrew and Stuart Mestelman, "What Have We Learned From Emissions
Trading Experiments?" Managerial and Decision Economics 19(4-5), June-August, 1998,
pp. 225-238.
Stavins, Robert N., "What Can We Learn from the Grand Policy Experiment? Lessons
from SO2 Allowance Trading," Journal of Economic Perspectives 12(3), Summer, 1998,
pp. 69-88.
Schmalensee, Richard, Paul L. Joskow, A. Denny Ellerman, Juan Pablo Montero, andElizabeth M. Bailey, "An Interim Evaluation of Sulfur Dioxide Emissions Trading,"
Journal of Economic Perspectives 12(3), Summer, 1998, pp. 53-68.

14

Price
250
224

195

This is a sample
graph. We will
distribute the graphthat you will use after
the instruction.

200
163

150
120

100

100

46

50

-47

-35

-20

40

21

0

55
Price

Price

Price

Profit

B
A

gain

B

B

revenueA

A
Benefit
Payment

Your position

No buy or no sell
Price

Buy!

Your position

Sell!

Your position
Price

Price
Profitgain

Benefitrevenue

Cost

Payment

Your position

No buy or no sell

Buy!

Sell!

Your position

Figure 1. A Sample GraphYour position

1-Russia 2-Ukraine 3-USA 4-Poland 5-EU 6-Japan

2

1

3

4
240

240

(-45)

215

5

6

250

250

(-27)

220

216

(-80)

(-50)

250

(-5)

(-15)

210

200

(-10)

180

(-35)

200
(5)

(-22)

165
(-73)

(-40)

166

170

162

(-20)

(-65)

130

120

118

(10)

90
(-55)
(-20)

70

(-10)

122
(23)
(25) 118

(-17)

(-30)

60

150

(15)

142

150
120

190

100

90

100
80

88

(20)

(50)

(35)

60

(-32)

40 50
(-10)

20 (10)

30

40
20
(33)

-80

-70

-60

-50

-40

-30

-20

-10

0

10

15

20

30

No country names were given to subjects in the experiment.

Figure 2. All Marginal Abatement Cost Curves

45 50

60

1
0.9
0.8

Efficiency

0.7
OO1
OO2
OX1
OX2
XO1
XO2
XX1
XX2

0.6
0.5
0.4
0.3
0.2
0.1
0
0

10

20

30

40

Min.
1
Figure 2 . Efficiency over Time.
2

50

60

Price Disclosure, MC Disclosure (OO1)

Price

Price Disclosure, MC Disclosure (OO2)

Price

170

170

Seller Buyer
Quantity
Traded

160
150
140
130

4

120
110

17

90 1
80

32

150
140
130

3

3

2
10

1

2 5
20

100

160

3
23

6

7

4

120

4

110

1

100 2

30

70

60

60

0

1

6

5

10

15

20

25

30

35

40

45

50

55

5

10

170

160

160
4

140

15

15

20

25

30

40

45

50

55

60

140
130 4

120

6

110
100

5
5
30

10

6

2
1

3

10

10

120

3

110

60
5

23

3
2

1

100

6

8

2
6
25

5

5

5

1
1

20

3

6

5

9

4

90

25

2

0

35

Minute

150

6

130

70

3

Price Disclosure, MC Closure (OX2)

Price

170

80

4

20

0

60

Price Disclosure, MC Closure (OX1)

Price

1

8

6 3
5
2 5
7
1

Minute

90

3

80

70

150

7

5
20

90

6

17

5

3

7
4

10

3

5
9

4
6

4
1 2 1
10
5

8

6

2 5
10

3
1

10

6 4

10

8

4

2

80
70

3
15

60
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15

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25

30

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40

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50

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60

0

5

10

15

20

25

MinuteFigure 3-1. Contracted Prices and Quantities over Time.

30

Minute

35

40

45

50

55

60

Price Closure, MC Disclosure (XO1)

Price

Price

170

170

160

160

150

150

140

3

130

4

10
2
6
20

120

5

3

22

5

2

10

5

1

Seller Buyer
Quantity
Traded

140

6

130
120

3

4
3
17

2

1

100 2

3
55

90

90

80

80

70

70

60

3

6

10

110

110
100

Price Closure, MC Disclosure (XO2)

7

3

4

1

40

3

5

5
20

5

1

6

8

8

60

0

5

10

15

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25

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0

60

5

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Price Closure, MC Closure (XX1)

Price

170

160
150

160

130
120

23

30

3

3

1
1

90 1

3

10

1

2

3
25

3

120

2

110

25

2

6

7

55

60

3
2

10

5

3
1
13

3

6

20

25

30

35

40

45

50

55

60

10
1

4

70

60
15

4

10

90

10

3

100

6

5

10

130

5

80

0

50

5

140

3

110
100

45

150

4
5
17
2

40

Price Closure, MC Closure (XX2)

Price

170

140

35

MinuteMinute

80
70

15

1

60
0

5

10

15

10

1

3

10

10

3

2

6
1

7

4

2

15

20

MinuteFigure 3-2. Contracted Prices and Quantities over Time.

25

30

Minute

35

40

45

50

55

60

280

280

Asks and Bids (OO1)

260
240

240

220

220

200

200

180

180

160

160

140

140

120

120

100

100

80

80

60

60

40

40

20

20

0

0
0

5

10

15

20

25

30

35

40

45

50

55

0

60

280

1 Russia 2 Ukraine 3 USA
4 Poland 5 EU 6 Japan

Asks and Bids (OO2)

260

5

10

15

20

25

30

35

ask

bid

40

45

50

55

60

40

45

50

55

60

280

Asks and Bids (OX1)260

Asks and Bids (OX2)

260

240

240

220

220

200

200

180

180

160

160

140

140

120

120

100

100

80

80

60

60

40

40

20

20

0

0
0

5

10

15

20

25

30

35

40

45

50

55

60

0

5

10

Figure 4-1.Bids and Asks over Time.

15

20

25

30

35

280

280

Asks and Bids (XO1)

260
240

240

220

220

200

200

180

180

160

160

140

140

120

120

100

100

80

80

60

60

40

40

20

20

1 Russia 2 Ukraine 3 USA
4 Poland 5 EU 6 Japan

Asks and Bids (XO2)

260

bid

ask

0

0
0

5

10

15

280

20

25

30

35

40

45

50

55

5

10

15

280

Asks and Bids (XX1)

260

0

60

240

220

220

200

200

180

180

160

160

140

140

120

120

100

100

80

80

60

60

40

40

20

20

25

30

35

40

45

50

55

60

45

50

55

60

Asks and Bids (XX2)

260

240

20

0

0
0

5

10

15

20

25

30

35

40

45

50

55

60

0

5

10

15

Figure 4-2. Bids and Asks over Time.

20

25

30

35

40

250

250

Marginal Abatement Cost (OO1)

Marginal Abatement Cost (OO2)

200

200

150

150

100

100

50

50

0

0
0

10

20

30

40

50

60

250

0

10

20

30

40

50

60

50

60

300

Marginal Abatement Cost (OX2)

Marginal Abatement Cost (OX1)

200

250
200

150
150
100
100
50

50

0

0
0

10

20

30

40

50

60

0

10

Figure 5-1. Marginal Abatement Cost over Time.

20

30

40

250

250

Marginal Abatement Cost (XO1)

200

150

150

100

100

50

50

0

0

0

10

20

30

40

Marginal Abatement Cost (XO2)

200

50

60

250

0

10

20

30

40

50

60

50

60

250

Marginal Abatement Cost (XX1)200

Marginal Abatement Cost (XX2)

200

150

150

100

100

50

50

0

0
0

10

20

30

40

50

60

0

10

Figure 5-2. Marginal Abatement Cost over Time.

20

30

40