GAO 

United States Government Accountability Office

Report to the Chairman, Committee on 

Finance, U.S. Senate 

CLIMATE CHANGE

Observations on 

Options for Selling 

Emissions Allowances 

in a Cap-and-Trade 

Program 

February 2010 

GAO-10-377 
What GAO Found

United States Government Accountability Office

Why GAO Did This Study

Highlights

Accountability Integrity Reliability

February 2010

CLIMATE CHANGE 

Observations on Options for Selling Emissions

Allowances in a Cap-and-Trade Program 

Highlights of GAO-10-377, a report to the 

Chairman, Senate Committee on Finance, 

U.S. Senate 

Congress is considering proposals 

for market-based programs to limit 

greenhouse gas emissions. Many 

proposals involve creating a cap-andtrade program, in which an overall 

emissions cap is set and entities 

covered by the program must hold 

tradable permits—or “allowances”— 

to cover their emissions. According 

to the Congressional Budget Office 

(CBO), the value of these allowances 

could total $300 billion annually by 

2020. The government could either 

sell the allowances, give them away 

for free, or some combination of the 

two. 

Some existing cap-and-trade 

programs have experience selling 

allowances. For example, member 

states participating in the European 

Union’s (EU) Emissions Trading 

Scheme (ETS) have sold up to 

about 9 percent of their 

allowances, and the amount of 

auctioning is expected to increase 

significantly starting in 2013. In the 

United States, the 10 northeastern 

states participating in the Regional 

Greenhouse Gas Initiative (RGGI) 

have auctioned about 87 percent of 

their allowances. 

This report is part of GAO’s 

response to a request to review 

climate change policy options. 

This report describes the 

implications of different methods 

for selling allowances, given 

available information and the 

experiences of selected programs. 

GAO reviewed relevant literature 

and interviewed program officials 

from the EU and RGGI, 

economists, and other researchers. 

This report contains no 

recommendations. 

The method of selling emissions allowances can have significant implications 

for a cap-and-trade program’s outcomes, and therefore, it is important that the 

method be chosen based on well-defined goals. Goals often cited by program 

officials and economists include: maintaining simplicity and transparency, 

maximizing participation, promoting economic efficiency, generating a price 

that reflects the marginal cost of reducing emissions, avoiding market 

manipulation, raising revenues, and minimizing administrative costs. 

According to program officials, it is important to identify goals prior to 

choosing a sales method, as tradeoffs may exist. Some goals may also be 

interrelated—for example, a simple and transparent design may boost 

participation and reduce the risk of market manipulation. 

Once goals are identified, policymakers face a number of choices regarding 

the design of a sales mechanism. Existing programs have used different 

mechanisms to sell allowances, including direct sales through exchanges and 

auctions. EU officials described exchange-based sales as effective and easy to 

implement, although they and other economists questioned whether this 

approach would be suitable for selling a high volume of allowances. Program 

officials also reported that auctions, the more commonly used sales 

mechanism in the EU and RGGI, effectively distributed allowances to program 

participants. However, some economists noted that auctions are not “one size 

fits all,” and should be designed to take into account market characteristics, 

such as the number of potential buyers. 

Using auctions to sell allowances would entail a number of other design 

choices. For example, policymakers could decide to utilize existing auction 

infrastructure, such as that used in exchanges or government auctions, or 

develop a new platform. Choices must also be made regarding the auction 

format and other design elements. 

• Auction format: The auction format determines, among other things, 

the price that winning bidders pay for allowances and the number of 

bidding rounds. To date, ETS and RGGI auctions have used a single 

round format in which each participant that bids above a certain price 

receives allowances at that price. Program officials expressed general 

satisfaction with this format, and economists noted that its relative 

simplicity may encourage participation. However, some economists 

also recommended that policymakers consider other formats as well, 

such as multiple-round auctions, given that experience with large-scale 

allowance auctions has been limited to date. 

• Other auction design elements: Apart from the auction format, other 

elements may affect outcomes, including: participation requirements, 

the frequency and timing of auctions, measures that establish lower or 

upper limits on allowance prices, and rules governing auction 

monitoring and the reporting of results. 

View GAO-10-377 or key components.

For more information, contact John B. 

Stephenson at (202) 512-3841 or 

stephensonj@gao.gov. 
Page i GAO-10-377 

Contents 

Letter 1

Background 3 

The Method of Selling Allowances in a Cap-and-Trade Program Can 

Influence Program Outcomes 5 

Appendix I Scope and Methodology 21 

Appendix II Other Elements of Auction Design 22 

Appendix III Allowance Sales Conducted in the EU ETS and RGGI 34 

Appendix IV GAO Contact and Staff Acknowledgments 36 

Tables 

Table 1: A Hypothetical Uniform-price Auction of 10 Allowances 13 

Table 2: Allowance Sales in the EU Emissions Trading Scheme as 

of 12/31/09 34 

Table 3: Auctions Held in the Regional Greenhouse Gas Initiative 

(RGGI) 35 

Figure 

Figure 1: Participant’s Bidding Screen, RGGI Uniform-Price, SingleRound Auction 14 

 Climate Change 
Abbreviations 

CBO Congressional Budget Office 

CRS Congressional Research Service 

ETS Emissions Trading Scheme 

EU European Union 

GDP Gross Domestic Product 

NAP National Allocation Plans 

OECD Organisation for Economic Co-operation and Development 

PPP Purchasing Power Parities 

RGGI Regional Greenhouse Gas Initiative 

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Page ii GAO-10-377 Climate Change
Page 1 GAO-10-377 

 

United States Government Accountability Office

Washington, DC 20548 

 

February 24, 2010 

The Honorable Max Baucus 

Chairman 

Committee on Finance 

United States Senate 

Dear Mr. Chairman: 

Concerns about the effects of climate change have led the Congress to 

consider legislation that would limit emissions of greenhouse gases 

nationwide. Elevated concentrations of greenhouse gases in the 

atmosphere as a result of human activities could increase global 

temperatures and affect ecosystems, agricultural production, 

infrastructure, and human health. Among greenhouse gases produced by 

human activity, carbon dioxide is emitted in by far the largest volume, 

mostly as a result of the combustion of fossil fuels for electricity, 

transportation, and industrial processes.1

 Many of the legislative proposals 

to limit greenhouse gas emissions would create a cap-and-trade program 

under which the government would place an overall cap on emissions and 

issue tradable permits. Entities covered by the program would have to 

surrender enough permits for all of their emissions at the end of specified 

time periods. Depending on the program, these “covered entities” may 

include power plants, oil refineries, and other manufacturing facilities. 

Each permit—known as an “allowance”—would represent a set quantity of 

greenhouse gas emissions, such as one metric ton.2

 Allowances could be 

purchased and sold, creating a market in which the price of emissions 

fluctuates with supply and demand. 

As we testified in August 2009, the government has two main options for 

distributing allowances, the value of which could total hundreds of billions 

1

The six primary greenhouse gases include carbon dioxide, methane, and nitrous oxide, as 

well as three types of synthetic gases: hydrofluorocarbons, perfluorocarbons, and sulfur 

hexafluoride. 

2

Programs that cover emissions other than carbon dioxide may quantify these emissions in 

terms of carbon dioxide equivalent. Carbon dioxide equivalents provide a common 

standard for measuring the warming efficiency of different greenhouse gases and are 

calculated by multiplying the emissions of the non-carbon dioxide gas by its global 

warming potential, a factor that measures its heat-trapping ability relative to that of carbon 

dioxide. 

 Climate Change 
 

of dollars annually by 2020.3 One option is to give allowances away for 

free, which would transfer their value to recipients and may compensate 

covered entities for costs incurred as a result of the program. Another 

option is to sell allowances, which would generate revenue that could be 

distributed in a number of ways—for example, tax cuts that improve 

economic efficiency or lump sum rebates to consumers. Selling 

allowances could also discourage efforts to gain free allowances through 

lobbying or other activities and help ensure that the price of emissions is 

the same for both new entrants and existing entities.4

 As a result, many 

experts we interviewed for a previous report suggested that a cap-andtrade program should maximize the share of allowances sold.5

 Existing 

cap-and-trade programs that regulate greenhouse gases have used two 

principal methods to sell allowances—sales on an exchange and 

auctions—and their experiences with these methods may offer valuable 

lessons as Congress considers establishing a cap-and-trade program.6

This report is one of four responding to your request for information on 

climate change policy options.7

 Our objective was to describe the 

implications of different options for selling emissions allowances in a capand-trade program, given available information and the experiences of 

 

3

GAO, Climate Change Policy: Preliminary Observations on Options for Distributing 

Emissions Allowances and Revenue under a Cap-and-Trade Program, GAO-09-950T

(Washington, D.C.: Aug. 4, 2009). See also: Auctioning under Cap-and-Trade: Design, 

Participation, and Distribution of Revenues Before the Senate Comm. on Finance, 111th 

Cong. (2009) (statement of Douglas Elmendorf, Director, Congressional Budget Office 

(CBO)). CBO notes that the actual value of allowances would depend on the design of the 

cap-and-trade program. 

4

For example, a firm may increase its emissions in pre-regulation years to drive up its 

emissions baselines and increase its allowance allocation. 

5

GAO, International Climate Change Programs: Lessons Learned from the European 

Union’s Emissions Trading Scheme and the Kyoto Protocol’s Clean Development 

Mechanism, GAO-09-151 (Washington, D.C.: Nov. 18, 2008). 

6

We do not assess nongovernmental sales as part of this report. Nongovernmental sales 

include the secondary market and sales or auctions by noncovered entities that receive 

allowances from the government entity administering the cap-and-trade program. For 

example, proposed legislation allocates some allowances to local distribution companies, 

state natural resource agencies, Indian tribes and other noncovered entities, and authorizes 

them to sell, auction, or retire the allowances. 

7

The three previous products are: GAO, Climate Change Trade Measures: Considerations 

for U.S. Policy Makers, GAO-09-724R (Washington, D.C.: July 8, 2009); GAO, Climate 

Change Trade Measures: Estimating Industry Effects, GAO-09-875T (Washington, D.C.: 

July 8, 2009); and GAO-09-950T. 

Page 2 GAO-10-377 Climate Change
 

selected programs. To address this objective, we reviewed and analyzed 

academic and professional literature produced by research organizations, 

academic institutions, environmental groups, and industry associations, 

including international research. We also analyzed information on two 

cap-and-trade programs that have sold allowances—the European Union’s 

(EU) Emissions Trading Scheme (ETS) and the Regional Greenhouse Gas 

Initiative (RGGI), an initiative of 10 U.S. Northeast and Mid-Atlantic states. 

We collected information on these programs from EU member state 

officials, European Commission officials, RGGI program officials, 

academic literature, and research organizations. In addition to 

interviewing officials involved with RGGI auctions, we selected a 

nonprobability sample of five EU member states—Austria, Denmark, 

Germany, Ireland, and the United Kingdom—for in-depth study, based on a 

review of background literature and interviews with knowledgeable 

officials. This sample enabled us to assess allowance sales that exhibited 

variation in several key areas: the size of the allowance market, the share 

of allowances auctioned, the design of the sale, and the amount of revenue 

generated. While the sample allowed us to learn about many important 

aspects of, and variations in, the design of allowance sales, it was not 

intended to provide findings that would be generalizable to all allowance 

sales. We also met with ETS officials and other stakeholders to discuss 

allowance sales methods used in individual EU member states as well as 

preparations for future large-scale auctions.8

 Appendix I provides a more 

detailed description of our scope and methodology. 

We conducted our work from December 2008 to February 2010 in 

accordance with all sections of GAO’s Quality Assurance Framework that 

are relevant to our objectives. The framework requires that we plan and 

perform the engagement to obtain sufficient and appropriate evidence to 

meet our stated objectives and discuss any limitations in our work. We 

believe that the information and data obtained, and the analysis 

conducted, provide a reasonable basis for any findings and conclusions in 

this product. 

Existing cap-and-trade programs that regulate greenhouse gases, such as 

the EU ETS, have experience in the sale of allowances. As we reported in 

November 2008, the ETS began the first of its trading periods, or “phases,” 

Background 

 

8

For information on future large-scale auctions, see: 

http://ec.europa.eu/environment/climat/emission/auctioning_en.htm#3. 

Page 3 GAO-10-377 Climate Change
 

in 2005.9 In Phase I, which ran from 2005 to 2007, member states were 

allowed to auction up to 5 percent of their allowances, with the remainder 

distributed to covered entities free of charge. The auctioning limit 

increased to 10 percent in Phase II, which is to run from 2008 to 2012. The 

EU’s decentralized approach gives member states the authority to design 

and execute their own sales. While some member states chose to sell or 

auction a portion of their allowances in Phases I and II, the quantity sold 

has been a relatively small percentage of the overall quantity of allowances 

distributed (see appendix III for more information).10 For Phase III, which 

begins in 2013, the EU decided to increase the amount of auctioning 

significantly, and as a result approximately half of all the allowances will 

be auctioned.11 The EU is currently assessing various auction design 

options for Phase III and beyond—including holding centralized, EU-wide 

auctions—and plans to adopt an official auctioning regulation by June 

2010.12

U.S. programs also offer experience in emissions allowance auctions. The 

federal government has auctioned allowances for the emission of sulfur 

dioxide under its Acid Rain Program since 1993, and the Commonwealth 

of Virginia auctioned allowances for nitrogen oxide emissions—a pollutant 

that contributes to the formation of smog—in 2004. More recently, in 2005, 

RGGI was created to regulate the carbon dioxide emissions of large fossil 

fuel-fired generators in participating states. RGGI has auctioned nearly 87 

percent of emissions allowances issued under the program for 2009, and 

each of the six centralized auctions held since September 2008 has raised 

between $38 million and $117 million for programs to promote energy 

efficiency and renewable energy projects, among other uses. In addition to 

auctions for emissions allowances, the U.S. government has experience 

 

9

For more information on the EU ETS, see GAO-09-151. 

10At the time of this report, Germany had committed to sell 40 million allowances per 

year—or 8.8 percent of all the allowances it will issue in Phase II—the most of any EU ETS 

member state since the inception of the program. According to program officials, Germany 

will also sell 1 to 1.5 million allowances to cover administrative costs. 

11Electric power and certain industrial installations were originally covered under Phase I 

of the program. The scope of the ETS was expanded in 2009 to include other installations 

and certain flights of aircraft operators from or to EU airports. In 2012 and subsequent 

trading periods, 15 percent of the total allowances available for distribution to aircraft 

operators will be auctioned. 

12Any auction, whether conducted by a member state or a centralized platform, must be 

open to covered entities throughout the EU because the ETS directive, or law, requires that 

all covered entities have fair, full, and equitable access to auctions in Phase III and beyond. 

Page 4 GAO-10-377 Climate Change
 

conducting other types of auctions, such as for government securities, 

surplus property, oil leases, timber harvests, and electromagnetic 

spectrum licenses. The Treasury Department’s Bureau of Public Debt, for 

example, conducts more than 250 public auctions per year involving over 

$5 trillion in marketable securities. 

In a cap-and-trade program for greenhouse gas emissions, covered entities 

and other interested parties will be able to buy allowances not only from 

the government, but also from participants in the secondary trading 

market. In the ETS, for example, allowances can be purchased through 

over-the-counter markets or on exchanges such as the European Climate 

Exchange in London or BlueNext in Paris. Secondary market trading can 

involve a range of intermediaries—including banks and brokers—and 

several types of allowance transactions can occur. “Spot” sales involve the 

immediate payment and delivery of allowances between two parties. 

Market participants may also trade “forward” or “futures” contracts, both 

of which allow for delivery of allowances at a later date.13 Futures 

contracts may be attractive to covered entities that wish to secure an 

allowance price in advance and reduce uncertainty about future 

compliance costs. Because the value of futures contracts fluctuates based 

on the current market price of allowances, parties that do not have a 

compliance obligation under the program may also wish to purchase them 

as an investment. 

The literature and programs that we reviewed present many options for 

the design of a mechanism to sell allowances under a cap-and-trade 

program. We drew two major observations from the literature and the capand-trade programs we reviewed. First, because elements of the 

mechanism’s design may affect outcomes—such as the price of 

allowances obtained at auctions and the cost of the program—it is 

important that design choices align with an emissions trading program’s 

goals.14 Second, once a goal is chosen, policymakers have numerous 

choices regarding the sale of allowances, including whether to sell them 

on an exchange or use auctions. If policymakers choose auctions—as did 

the majority of countries participating in the ETS and the RGGI states—

The Method of Selling 

Allowances in a Capand-Trade Program 

Can Influence 

Program Outcomes 

 

13In forward contracts, the specific terms are negotiated between buyers, whereas futures 

contracts refer to standardized agreements available only through exchanges. 

14The price of allowances is affected by a number of factors, including the stringency of the 

cap, energy prices, and weather conditions. 

Page 5 GAO-10-377 Climate Change
 

they must also make important design choices in the areas of format, 

participation requirements, frequency and timing, price controls, and rules 

for reporting and monitoring. 

Establishing Clear Goals Is 

Critical 

Program officials and economists suggested establishing clear goals to 

help guide the design and implementation of government allowance sales 

in a cap-and-trade program. Identifying priorities early is critical to 

developing an effective sales approach, as certain designs may better serve 

certain goals. Goals commonly cited by researchers and program officials 

include: 

• Simplicity and transparency. Many economists and program officials 

recommended that allowance sales be simple and transparent for all 

participants. Sales should be guided by rules that are clear and 

understandable—both to participants and to the general public—to 

encourage participation, prevent discrimination, and ensure easy access to 

allowances. To that end, several economists and program officials 

recommended selecting an auction format that is easy to use and does not 

involve complicated bidding procedures. Reporting sales results in a 

public and timely manner can also help to create a transparent market. 

• Maximizing participation. Ensuring sufficient levels of participation in 

allowance sales is critical, according to available information and program 

officials we interviewed. Participation fosters competition and limits 

opportunities for collusion. Economists and program officials also advised 

that sales should not discriminate against any one group of participants, 

whether by excluding them directly or indirectly, such as through high 

transaction costs. Participation can also be encouraged with a simple and 

transparent auction design. 

• Economic efficiency. Economic literature suggests that efficiency is a key 

goal for allowance sales. In the case of allowance auctions, economic 

efficiency can be achieved if allowances are purchased by those who value 

them the most. A general measure of the efficiency of an auction, 

therefore, is its ability to generate bids that accurately reflect how much 

value a bidder places on the allowance. If efficiency is achieved, the 

resource—in this case, the right to emit greenhouse gases—is allocated to 

its highest-valued use. Efficiency may be affected by strategic bidding 

behavior or collusion if these activities artificially depress the price of 

allowances. 

• Facilitating price discovery. Allowance sales may help facilitate price 

discovery—the process of determining a commodity’s price based on 

Page 6 GAO-10-377 Climate Change
 

supply and demand. Sales that successfully facilitate price discovery will 

generate an allowance price that accurately reflects the marginal cost of 

reducing emissions. That is, the price would reflect decisions by covered 

entities either to reduce their emissions or to purchase allowances to 

cover them, whichever is more cost-effective. Economists expect that this 

process of price discovery will prompt emissions reductions by those 

covered entities that can undertake them most cost-effectively. Without 

effective price discovery, the overall efficiency of the allowance market 

may be diminished, increasing the program’s costs to the economy. 

According to several program officials involved in the ETS, the need for 

price discovery depends on the volume of allowances sold under the 

program. If only a small percentage is sold, and the rest freely allocated, 

price discovery will be accomplished in the secondary market.15

• Avoiding market manipulation. According to economic literature, 

allowance sales should limit opportunities for participants to collude or 

engage in other forms of market manipulation. Collusion to depress 

allowance prices, if successful, could distort price signals, reduce 

revenues collected by the government from the sale of allowances, and 

cause participants and observers to question the fairness and transparency 

of the program. In addition, if allowance ownership were to become 

concentrated among a small group of participants in the secondary 

market, these participants could then withhold allowances from the 

market, driving up prices and impeding efficiency. However, several 

program officials and economists said it would be difficult to pursue such 

a strategy in the presence of a liquid market, since participants would have 

to acquire large shares of allowances both at individual auctions and in the 

secondary market. In addition, literature and economists we interviewed 

suggest that a U.S. cap-and-trade program for carbon dioxide allowances 

would likely attract a large number of participants. According to them, 

broad participation would prevent any single participant from gaining 

undue influence within the market, limiting opportunities for collusion and 

market manipulation. 

• Revenue generation. Available literature suggests that policymakers could 

also aim to maximize the level of revenues collected from the sale of 

allowances. For example, policymakers could design a sale so that it is 

more likely to achieve high allowance prices. However, while maximizing 

revenue is a common goal in other government auctions of public assets, 

high allowance prices could increase the burden of a cap-and-trade 

 

15In the EU ETS, sellers that participate in the secondary market include banks, brokers, 

covered entities, and investors. 

Page 7 GAO-10-377 Climate Change
 

program on covered entities or consumers of their products, which could 

erode political support for the program. Furthermore, some program 

officials noted that it would be much easier to accomplish this goal by 

increasing the stringency of the emissions cap. 

• Minimizing administrative and transaction costs. Several economists 

and program officials recommended minimizing the administrative and 

transaction costs associated with allowance sales. Administrative costs 

are the time and resources governments spend designing and 

implementing allowance sales; available information suggests that most of 

these costs are incurred in the design phase of the program. Transaction 

costs, on the other hand, refer to costs incurred by participants in 

obtaining allowances—for example, costs associated with registering for 

an auction, developing a bidding strategy, and any bidding fees. According 

to available information, high transaction costs could discourage 

participation, and smaller entities in particular may face 

disproportionately high costs relative to the value of allowances they 

purchase. According to economic literature, the design of an allowance 

sale can have a significant impact on both administrative and transaction 

costs. For instance, weekly auctions may result in higher administrative 

and transaction costs than those held less frequently, although using 

existing infrastructure may help to minimize these costs. While several 

economists noted that any costs incurred by governments and participants 

would likely be minor compared to the value of the allowances, program 

officials said that keeping these costs low would help ensure ongoing 

support for the program. 

According to available literature and economists we interviewed, 

identifying the goals of the sale in advance can help policymakers evaluate 

the likely effects of a given sales method. This is especially important 

given that trade-offs may result from decisions regarding the various 

aspects of auction design. For example, a method that increases revenue 

collected from allowance sales may not be the most economically efficient 

approach. Some goals may also be interrelated—for example, a simple and 

transparent design may boost participation and reduce the risk of market 

manipulation. 

Many Design Options Are 

Available to Meet 

Established Goals 

The literature and programs that we reviewed present many options for 

the design of a mechanism to sell allowances in a cap-and-trade program. 

Each option has implications that will help determine the extent to which 

a program meets its goals. At a high level, policymakers face a choice 

about using auctions or other types of sales to distribute allowances. 

Auctions, if used, would entail additional design choices. 

Page 8 GAO-10-377 Climate Change
 

According to available literature, selling emissions allowances through an 

exchange enables buyers to purchase allowances from an electronic 

platform as they would stocks or other commodities. While sales on an 

exchange are less widely used for emissions allowance distribution than 

auctions, two ETS member states have had experience with exchangebased sales: Germany (in ETS’s Phase II) and Denmark (in ETS’s Phase 

I).16 Germany’s sales, directed by Germany’s state-owned bank, took place 

through two major European exchanges—the European Climate Exchange 

and the European Energy Exchange.17 Allowances were sold daily, 

according to rules specified by the government. The bank used the same 

process as other members of the exchange wishing to trade allowances, 

such that buyers could not distinguish the government from other 

participants in the secondary market. Denmark’s sales method differed 

from Germany’s in that it paid a fee to two private firms to sell allowances 

on European exchanges. Rather than instructing the two firms to sell 

allowances daily, as Germany did, Denmark structured the fees paid to the 

firms such that they received an incentive to sell when they judged price 

conditions to be most favorable. 

Sales or Auctions 

German and Danish officials we interviewed expressed general 

satisfaction with sales on exchanges and cited their potential strengths in 

meeting certain goals. For example, Germany’s goal was to match the 

average secondary market price as closely as possible without disrupting 

the market, according to officials. Information provided by Germany’s 

state-owned bank shows that the allowance price yielded through the 

exchanges did in fact mirror the market price of allowances sold during 

the same time period. Several officials praised the efficiency of such sales 

and reported general satisfaction among participants. Other potential 

advantages of sales over auctions include: 

• Lower administrative costs. Germany and Denmark used existing 

exchanges, which made it unnecessary to design and administer auctions. 

• Ease of use. Some member state officials we interviewed said that sales on 

exchanges are simpler than auctions on separate platforms because many 

 

16In 2010, Germany began auctioning rather than selling allowances. 

17The European Climate Exchange trades two types of carbon credits: EU ETS allowances 

and credits issued through the Clean Development Mechanism, a carbon offset program 

established under the Kyoto Protocol. The European Energy Exchange operates market 

platforms for both types of credits, as well for power, natural gas, and coal. 

Page 9 GAO-10-377 Climate Change
 

of the large companies affected by the ETS are already registered and 

active participants in the exchanges. According to German officials, this is 

one reason Germany continued using existing exchanges when it made the 

transition from sales to auctioning in 2010. 

Despite these possible advantages, implementing such sales may prove 

challenging given the scale of a potential U.S. program. While Germany 

expects to sell or auction 40 million allowances annually in Phase II of the 

ETS—the highest volume among EU member states to date—legislation 

being considered by the U.S. Congress proposes initially auctioning over 1 

billion allowances in 2012 alone.18 On such a large scale, auctions may be 

more feasible or desirable than sales, according to several economists and 

program officials. For example, European officials said that if large 

volumes of allowances are sold in this manner, it may be difficult to ensure 

that all participants, including smaller entities, are equally able to buy 

allowances at the market price. Some program officials also expressed 

reservations that that if a high volume of allowances were sold through 

exchanges, the government would become the dominant seller in the 

secondary market and affect the price formation process. Moreover, one 

economist pointed out that no extensive studies had been undertaken on 

the performance of sales on exchanges, whereas auctions are well 

understood as a mechanism of distributing government assets. 

Program officials reported that auctions, the more commonly used sales 

mechanism in the EU and RGGI, effectively distributed allowances to 

program participants, although several noted that allowance auctions have 

not yet been implemented on a large scale. According to economic 

literature and the economists and officials we interviewed, potential 

strengths of auctions include: 

• Price discovery. As economists and officials have noted, the process of 

auctioning helps to establish the cost of emission reductions and maintain 

an allowance price that reflects that cost. Auctions enable a government to 

put allowances together in “batches” and sell them at predetermined 

times, and may help regulated entities make business decisions that 

incorporate the cost of compliance with emissions regulations. As one 

economist explained, auctions encourage covered entities to assess their 

marginal costs of emissions abatement, consider their allowance needs 

carefully, and bid accordingly. However, some economists and officials 

 

18H.R. 2454, 111th Cong. (2009). 

Page 10 GAO-10-377 Climate Change
 

said that regardless of whether auctions or sales are used, price discovery 

will occur in the secondary market, once that market becomes established. 

• Simplicity. Many of our interviewees cited auctions’ simplicity as an 

advantage over sales because auctions are well-understood. RGGI officials 

reported that covered entities with a range of auction experience received 

training in the RGGI auction process and had no trouble familiarizing 

themselves with it. 

• Lower transaction costs. Holding periodic auctions—weekly, monthly, or 

quarterly, for example—may decrease the per-transaction cost of buying 

and selling allowances, since buyers and sellers would not need to devote 

the time and resources necessary to participate in daily trading. 

• Transparency. According to economists and officials, auctions take place 

under established rules and time frames, and thus convey clear 

information about when and how the government will sell allowances. 

According to European Commission officials, establishing a clear and 

predictable auction calendar can help inform market participants of the 

precise timing of volumes coming into the market, thereby avoiding 

unnecessary uncertainty and price volatility.19 Sales on exchanges may be 

less transparent, since it is difficult to monitor who is selling allowances 

and at what time. 

Program officials noted that auctions can also be administered through 

exchanges. For example, Germany decided to conduct auctions using an 

existing European trading exchange beginning in 2010. According to a 

program official, this approach allows them to draw on preexisting auction 

infrastructure and administrative processes, as allowance bids are subject 

to the same rules as other exchange transactions. The European 

Commission’s for the draft auctioning regulation governing ETS auctions 

in Phase III and beyond also proposes using an exchange or other trading 

platform to vet participants and administer auctions. 

Allowance auctions could also be administered in other ways. For 

example, policymakers could use existing government auction 

mechanisms—such as those used by the U.S. Treasury to auction 

 

19In some cases, price volatility may convey information about changes in market 

fundamentals. For example, the release of verified data in Phase I of the EU ETS indicated 

that the overall cap was likely to exceed total emissions. Prices fell in response, which 

established that the market was functional. 

Page 11 GAO-10-377 Climate Change
 

securities—to auction allowances. Alternatively, policymakers could 

choose to create a new auctioning platform or hire contractors to 

administer auction processes. For example, RGGI opted to use a 

proprietary auctioning platform, run by a contractor with experience in 

administering auctions for energy commodities. 

If auctions are used, several other design determinations must be made, 

including: format, timing and size, participation requirements, price 

controls, and monitoring and reporting requirements. 

The choice of auction format can affect how well the auction aligns with 

predetermined goals, such as maximizing simplicity, avoiding market 

manipulation, and aiding in price discovery. We focused our analysis on 

two classes of auctions most commonly discussed in the context of 

emissions allowance auctions—”uniform-price” and “discriminatory-price” 

auctions. 

Auction Format 

Choosing an appropriate auction format involves answering two key 

questions: 

• What price should winning bidders pay for allowances? 

• In uniform-price auctions, all winning bidders pay the same price for 

the items purchased. In the hypothetical example illustrated in table 1, 

5 companies bid for 10 allowances in a uniform-price auction. Even 

though they made different bids, each company that bids above a 

certain price receives allowances at the same price. This “clearing 

price” is the highest price point at which all of the 10 allowances 

available would be sold.20 In this example, companies A, B, and C each 

receive allowances at the clearing price of $3.50, although Company C 

receives only 2 of the 3 requested allowances because the number of 

bids at or above the clearing price exceeds the number of allowances 

available at this price. Companies D and E, which bid below the 

clearing price, receive no allowances. 

 

20Different ways may exist for determining the clearing price in a uniform-price auction. 

For example, the price may be the lowest bid price at which all available allowances 

received a bid, or the highest bid that is rejected. 

Page 12 GAO-10-377 Climate Change
 

Table 1: A Hypothetical Uniform-price Auction of 10 Allowances 

Name of company

Number of allowances 

requested 

Price per allowance requested 

(in dollars)

Company A 6 5.00

Company B 2 4.00

Company C 3 3.50

--------------------------Clearing price

Company D 4 2.75

Company E 4 2.50

Source: GAO. 

Note: There were 10 allowances available. Companies A and B received the full allowance request, 

Company C received a partial allowance request, and Companies D and E received no allowances. 

• In “discriminatory-price” auctions, winning bidders pay different prices for 

allowances purchased at auction. In some discriminatory-price auctions, 

winning bidders pay the amount of their bid. For example, in the 

hypothetical auction presented in table 1, Company A would get its full 

share of requested allowances at $5 each, Company B would pay $4 each, 

and Company C would receive part of its request at $3.50 per allowance. 

• How many rounds of bidding should take place? 

• In a typical single-round auction, participants place bids once during a 

predetermined time period. Because participants do not see other bids 

before the outcome is announced, no opportunity is provided to change 

a bid based on information about others’ bids. The single-round auction 

is thus sometimes referred to as a “sealed-bid” auction.21 Figure 1 

presents a simplified version of the RGGI software interface that 

participants use for RGGI’s single-round auctions. As the figure shows, 

participants assemble a bid sheet, specifying the quantity of allowances 

requested at a stated bid price. Each participant may submit several 

bids at several different prices, if desired. According to a RGGI 

program official, when RGGI’s auction results are tabulated by the 

auction administrator’s automated system, the results appear in a 

format similar to that shown in table 1. Participants whose bids appear 

above the line receive allowances, those bidding at the clearing price 

 

21While the terms “sealed-bid” and “single-round” are often used interchangeably, sealed-bid 

auction procedures may also be used in multiple-round formats. For example, in a sealedbid, multiple-round auction, participants could submit a set of bids in advance of the 

auction and the bids would be revealed over time as the auction progresses. 

Page 13 GAO-10-377 Climate Change
 

receive a partial allocation, and those below the line do not receive 

allowances. 

Figure 1: Participant’s Bidding Screen, RGGI Uniform-Price, Single-Round Auction 

Company Name Bid Amount Bid Quantity Bid Value Cumulative Quantity

Company E

Company E

Company E

Company E

Company E

Company E

$5.00

$3.50

$2.00

$1.90

$1.88

$1.86

5

10

15

20

50

100

$25.00

$35.00

$30.00

$38.00

$94.00

$186.00

5

15

30

50

100

200

Place Bid

RGGI

INC.

Start Markets RFPs

View RFP Bid History Awards

Auction Start Time: 11:00 a.m. Time Left: 0d 2h 25m 16s

Auction End Time:1: Yo 30 p.m. ur Total Bids: 6

Total Quantity: 3,000 allowances Res erve Price $1.86

Bid Value: $408 Bid Quantity Total: 200 allowances

Auction Information

Bid Summary

Bid History

Source: Adapted from World Energy Solutions, Inc., RGGI’s auction administrator. The table in the original replicates the RGGI auction 

bidding screen.

RGGI CO2 BUDGET TRADING PROGRAMS

Help My Profile Logout

Fixed-Training-CO2 Auction 1a

Printable View

RGGI, Inc.

Total Bids in View:6

• Auctions with multiple rounds of bidding occur in several formats, 

among them the “English” auction, in which the auction administrator 

raises the price of allowances round by round, and the “Dutch” auction, 

in which the auction administrator decreases the price round by round. 

Both the English and Dutch auctions are commonly referred to as 

Page 14 GAO-10-377 Climate Change
 

“clock auctions,” since the price is raised or lowered incrementally, like 

a clock’s hands. Participants in multiple-round auctions have the 

opportunity to change the quantity of allowances for which they bid—

or drop out of the bidding—as information is revealed round by round. 

Importantly, economists note that to discourage participants from 

potentially distorting allowance prices by increasing the quantity for 

which they bid in later rounds—after competitors have revealed their 

strategies—a clock auction can include a rule against increasing the bid 

quantity after the first bidding round. 

In designing an auction, policymakers may consider selecting a format that 

is sensitive to the context of the allowance market. Previous U.S. federal 

government experience with auctions has involved different formats in 

different markets. For example, in 1994 the Federal Communications 

Commission chose to auction spectrum licenses in a simultaneous 

multiple-round format. By contrast, Environmental Protection Agency 

auctions of allowances to emit sulfur dioxide involve a single round where 

successful bidders pay as they bid, and auctions of government securities 

held by the U.S. Department of the Treasury involve uniform pricing. 

In interviews and in economic literature, officials and economists have 

emphasized the importance of tailoring an auction for carbon dioxide 

allowances to the characteristics of the market, which may be different 

from other markets where auctions have been used. An auction of carbon 

dioxide allowances would sell many identical items—permits to emit a 

specified quantity of carbon dioxide in a particular time period.22

Additionally, bidders in this market could include a large number of 

covered entities that emit carbon dioxide. These characteristics reveal 

both similarities and differences from some of the other markets listed 

above. For example, not all broadband spectrum licenses are alike, and 

their value to a buyer may further depend on the portfolio of licenses held. 

Furthermore, the number of potential buyers may be greater in the market 

for carbon dioxide emissions than sulfur dioxide emissions, in part 

because carbon dioxide is emitted in greater volume. 

Existing cap-and-trade programs for carbon dioxide allowances—the EU 

ETS and RGGI—have employed the uniform-price, single-round format, in 

which winning bidders submit secret bids and pay the same price for 

allowances. Several program officials we spoke with expressed general 

 

22If greenhouse gases other than carbon dioxide are covered under the program, 

allowances would likely represent one unit of carbon dioxide equivalent. 

Page 15 GAO-10-377 Climate Change
 

satisfaction with this format, and the draft auctioning regulation governing 

ETS auctions in Phase III and beyond also proposes this approach. 

According to literature and economists we interviewed, advantages of this 

format include: 

• Simplicity. For regulated entities that have participated in auctions, the 

simplicity and familiarity of the uniform-price, single-round format may 

prove valuable, according to several economists. This format has also 

proved easy to learn for those unfamiliar with auction processes, 

according to officials, as it involves relatively simple bidding procedures. 

One economist also reported that the uniform-price, single-round format is 

well-suited to automation compared to other auction formats, with much 

of the work handled by sophisticated but inexpensive computer programs. 

This economist pointed to RGGI, a small organization handling large pools 

of assets, as a case study in how simple the uniform-price, single-round 

auction can be to administer. 

• Avoidance of market manipulation. Some economists said that other 

auction formats, such as clock auctions, may be more conducive to 

collusion than single-round auctions, because multiple bidding rounds give 

other bidders information and create opportunities for collusion. 

• Reduced risks for bidders. Program officials and economists also said that 

the uniform-price, single-round format may alleviate concerns that could 

arise in discriminatory-price auctions. If a discriminatory-price auction 

requires participants to pay the value of their bids, for example, they run 

the risk of overbidding and paying more than other winning bidders for 

allowances. This may be of particular concern for small and inexperienced 

bidders, who may lack the information and resources to formulate a 

sophisticated bidding strategy. Uniform-price auctions reduce the 

possibility of making a costly bidding mistake, since all winning 

participants pay the same allowance price. For this reason, some 

economists believe that uniform-price auctions will generate greater 

participation than discriminatory-price auctions. 

Despite the strengths of the uniform-price, single-round format, some 

economists suggested that policymakers undertake further study before 

selecting an auction format. One study suggests that laboratory 

experiments with auction format options may provide insights that 

theoretical studies cannot, given the context-specific nature of the 

Page 16 GAO-10-377 Climate Change
 

performance of various auction formats.23 One economist also said that 

legislation need not specify a single auction format and could instead 

instruct government agencies responsible for the program to choose 

among various format options. Several RGGI states followed this path, by 

issuing regulations authorizing the auction administrator to use the 

uniform-price, single-round auction format or the ascending price, 

multiple-round format.24 Policymakers could also leave room to revisit the 

auction format stipulated in cap-and-trade legislation, although 

introducing significant changes at later stages would require participants 

to relearn auctioning procedures. 

Among auction format options other than the uniform-price, single-round 

format, the clock format may have comparative strengths in achieving 

certain goals, according to economists we interviewed. For example, 

economic literature suggests that clock auctions may lead to more reliable 

price discovery, since each participant may raise its bids in an attempt to 

win allowances, so that allowances go to those who are willing to pay the 

most.25 However, economists who did experimental work on auction 

formats said that a clock auction fared no better in terms of price 

discovery than a uniform-price, single-round auction. Another argument 

for the clock format arises if multiple products are sold at an auction. For 

example, in addition to auctioning allowances for the current year, the 

government could decide to auction allowances of other future-year 

vintages—that is, allowances sold in advance of the compliance year(s) in 

which they may be remitted. A clock format would allow bidders to 

express preferences for different vintages, which may allow more readily 

for substitution of one vintage for another and prevent price irregularities. 

The clock auction format may also present some disadvantages. An official 

involved with Ireland’s auctions said they chose a uniform-price, singleround format after determining that a clock auction would be 

comparatively expensive and difficult to implement. The format may also 

 

23Burtraw, Dallas, Jacob Goeree, Charles A. Holt, Erica Myers, Karen Palmer, and William 

Shobe, “Collusion in Auctions for Emissions Permits,” Resources for the Future Discussion 

Paper 08-36. 

24However, some state regulations required the uniform-price, single-round format for the 

first auction, but then authorized the auction administrator to choose among (1) the 

uniform-price, single-round format; (2) the ascending-price, multiple-round format; or (3) 

other formats for subsequent auctions. 

25Cramton, Peter and Suzi Kerr, “Tradeable Carbon Permit Auctions: How and Why to 

Auction not Grandfather,” Energy Policy (30) 2002, pp. 333-345. 

Page 17 GAO-10-377 Climate Change
 

complicate participation: one economist involved with Virginia’s clock 

auctions of nitrogen oxide allowances received complaints about 

participants having to work at a computer terminal all day to compete in 

the auction. A single-round auction format, by contrast, would only require 

participants to submit a single bid sheet, similar to that shown in figure 1 

above. The economist also pointed out that having thousands of 

participants monitoring a day of multiple-round auctioning in a large 

federal program would increase the cost of both participating in the 

program and administering it. 

Apart from format, policymakers would face a number of choices related 

to auction design, each of which has implications for program outcomes. 

Among other things, choices must be made regarding participation rules, 

the frequency and timing of auctions, the use of reserve prices or other 

price controls, and the monitoring and reporting of auction activities. We 

briefly describe each of these considerations below and provide additional 

detail in appendix II. 

Other Auction Design Elements 

Participation. Maintaining high levels of auction participation can lead to 

greater competition which, in turn, can reduce the risk of collusion or 

other market manipulation. To maximize participation, economists and 

program officials recommended opening auctions up to as wide of a group 

of bidders as possible, including financial institutions and other entities 

that do not have compliance obligations under the program. According to 

them, limiting participation can increase the risk of market manipulation, 

making it difficult to ensure that all covered entities have access to 

allowances. In addition, program officials said that a well-designed vetting 

and registration system can reduce the risk that a participant will default 

on a bid. 

Frequency and timing. According to economists, the frequency of 

auctions should be driven by the volume of allowances sold: higher 

volumes of allowances may require more frequent auctions. Available 

information suggests that holding frequent auctions, such as monthly or 

weekly, can help maintain market liquidity and provide flexibility to 

covered entities. On the other hand, some officials said frequent auctions 

may also complicate planning and increase administrative costs, 

depending on how the auctions are conducted. In terms of timing, many 

officials recommended auctioning future-year vintage allowances, which 

allow covered entities to secure allowances in advance and reduce the 

risks associated with fluctuating prices. 

Page 18 GAO-10-377 Climate Change
 

Price controls. Price controls could be implemented in a number of ways. 

A reserve price would set a price below which no allowances can be sold 

at an auction. Several program officials and economists suggested that 

setting a reserve price can be an effective way to guard against low 

auction clearing prices that may result from collusion or low participation. 

In addition, in some cases a reserve price may serve as a “price floor” 

throughout the secondary market. According to some economists and 

researchers, a price floor may help provide incentives for investment in 

low carbon technologies; however, some program officials cautioned that 

price floors could unduly interfere with the functioning of the allowance 

market. At the other end of the price spectrum, policymakers could also 

set upper limits on the price of allowances through price ceilings. While 

price ceilings could provide insurance against sustained high allowance 

prices, some program officials advised against the use of these measures, 

which they said could compromise emissions goals and impede 

international linkage of programs. 

Monitoring and reporting. An effective system to report auction results 

and monitor activity can increase transparency and help oversight entities 

identify and correct instances of market abuse. Information on auction 

results can also provide information with which to evaluate and improve 

the program. As a result, several officials and economists recommended 

establishing a market monitor to track activity at auctions and in the 

secondary market. However, in reporting auction results, economists and 

officials cautioned against reporting certain information, such as bidders’ 

identities, which they said could inadvertently facilitate collusion. 

We conducted our work from December 2008 to February 2010 in 

accordance with all sections of GAO’s Quality Assurance Framework that 

are relevant to our objectives. The framework requires that we plan and 

perform the engagement to obtain sufficient and appropriate evidence to 

meet our stated objectives and discuss any limitations in our work. We 

believe that the information and data obtained, and the analysis 

conducted, provide a reasonable basis for any findings and conclusions in 

this product. 

As agreed with your office, unless you publicly announce the contents of 

this report earlier, we plan no further distribution until 30 days from the 

report date. At that time, we will send copies to the appropriate 

congressional committees and other interested parties. In addition, the 

report will be available at no charge on GAO’s Web site at 

http://www.gao.gov. 

Page 19 GAO-10-377 Climate Change
 

If you or your staff have any questions about this report, please contact me 

at (202) 512-3841 or stephensonj@gao.gov. Contact points for our Offices 

of Congressional Relations and Public Affairs may be found on the last 

page of this report. Individuals making key contributions to this report are 

listed in appendix IV. 

Sincerely yours, 

John B. Stephenson 

Director, Natural Resources and Environment 

Page 20 GAO-10-377 Climate Change
Appendix I: Scope and Methodology Appendix I: Scope and Methodology 

Our review assesses the implications of different options for selling 

allowances in cap-and-trade programs. To address this objective, we first 

identified cap-and-trade programs that regulate carbon dioxide emissions 

and have sold allowances through auctions or other means. Programs that 

met these criteria were the European Union’s (EU) Emissions Trading 

Scheme (ETS) and the Regional Greenhouse Gas Initiative (RGGI). We 

then selected a nonprobability sample of 5 member states involved in the 

ETS—Austria, Denmark, Germany, Ireland, and the United Kingdom—in 

order to assess different methods that EU governments have used to sell 

allowances.1

 This sample enabled us to assess allowance sales that 

exhibited variation in several key areas: the size of the allowance market, 

the share of allowances auctioned, the design of the sale, and the amount 

of revenue generated. While the sample allowed us to learn about many 

important aspects of, and variations in, the design of allowance sales, it 

was not intended to provide findings that would be generalizable to all 

allowance sales. 

To identify various options for selling allowances, we identified and 

reviewed over 40 works of academic and professional research produced 

by economists, industry associations, research organizations, academic 

institutions, and environmental groups, including international research. 

We identified these works through an internet and database search using 

relevant key words such as “allowance sales” and “auction design.” We 

also analyzed literature from government agencies, including the 

Congressional Budget Office (CBO) and the Congressional Research 

Service (CRS). Reviewing this research helped us to assess the different 

methods for designing an allowance sales mechanism and the potential 

implications of these methods. We did not independently assess the 

validity of data, assumptions, or methodologies underlying the economic 

studies we reviewed. We met with U.S. and international stakeholders 

including officials from RGGI and the European Commission as well as 

program officials in Austria, Denmark, Germany, Ireland, and the United 

Kingdom. We also conducted semistructured interviews with leading 

economists and researchers selected on the basis of their expertise in 

climate policy or auction design. 

 

1

In the ETS, individual member states chose to hold national auctions in Phases I and II. 

Because all states participating in RGGI chose centralized auctions, we did not select a 

sample of RGGI states. 

Page 21 GAO-10-377 Climate Change 
Appendix II: Other Elements of Auction Appendix II: Other Elements of Auction Design 

Design 

There are several key elements of auction design, in addition to format, 

that can affect whether an auction meets its established goals. This 

appendix provides more detail on the observations and recommendations 

of program officials, economists, and the economic literature regarding 

the following auction design elements: participation, frequency and timing, 

price controls, and reporting and monitoring. 

Policymakers may shape participation in a cap-and-trade auction through 

various aspects of auction design. For example, auctions could be 

designed to restrict participation or to provide special assistance to 

smaller entities. Available information suggests that maintaining high rates 

of participation in allowance auctions can help promote liquidity and 

reduce the risk of collusion. We discuss three auction characteristics that 

help determine participation: participation limits, bid limits, and 

procedures for vetting and registration. 

Participation 

Requirements 

Participation limits. Available literature suggests that limiting or 

eliminating the ability of certain entities to participate in allowance 

auctions could reduce the amount of revenue generated through the 

auctions and hinder the efficient allocation of allowances. For example, 

excluding those entities that do not have a compliance obligation under 

the program would decrease overall auction participation, which, in turn, 

may increase the likelihood of collusive activities to depress allowance 

prices. In addition, if the auction clearing price falls below the price in 

secondary markets—whether due to collusion or other factors—auction 

participants may be able to buy allowances at auction and sell them on the 

secondary market for profit, thus capturing revenues that would have 

otherwise gone to the government. According to one study, the end result 

would be an implicit subsidy to the entities allowed to participate in the 

auction and a corresponding reduction in government revenue. Moreover, 

some program officials maintained that restricting certain groups from 

participating may present practical challenges given the interrelated 

nature of the marketplace—for example, while a buyer may not be a 

covered entity under the cap-and-trade program, it could be a parent 

company, supplier, or partner to a covered entity. According to 

researchers involved in the design of RGGI’s auctions, attempting to 

assess and monitor these relationships could prove costly for an auction 

administrator. 

Given these concerns, many economists and program officials favored 

maximizing the number of potential auction participants. Auctions held 

within the ETS and RGGI, for example, have allowed noncovered 

Page 22 GAO-10-377 Climate Change
Appendix II: Other Elements of Auction 

Design 

entities—including banks, brokers, and other private firms—to purchase 

allowances at auctions. In fact, noncovered entities have purchased 

between 16 and 30 percent of allowances sold in RGGI auctions thus far, 

according to auction results data published on RGGI’s Web site. 

Economists and officials involved with these programs said that financial 

entities can play an important role in the market. For example, banks and 

brokers can foster liquidity and help provide regular price signals to 

covered entities. Smaller entities, in particular, may prefer purchasing 

allowances at financial institutions, as this relieves them of the need to 

learn the particulars of the auction process and develop an appropriate 

bidding strategy. 

Bid limits. To prevent entities from hoarding allowances—which could 

allow these entities to gain a competitive advantage or raise the price of 

allowances, among other things—policymakers could set limits on the 

amount of allowances entities can purchase at auction. For example, in 

RGGI, associated entities can purchase no more than 25 percent of the 

allowances available in a given auction. However, such limits may be 

difficult to enforce, according to one program official, since one entity 

may be able to bid on behalf of another. Moreover, several economists and 

program officials we spoke with suggested that hoarding behavior would 

be highly unlikely in a future U.S. program, since an entity aiming to 

corner the market may have to buy the majority of allowances across 

several consecutive auctions, an unlikely possibility given the anticipated 

price and volume of allowances and the number of entities seeking them. 

Vetting and registration. For an auction to be successful, participants 

must meet the financial commitments associated with their bids. Auctions 

may therefore include an application and screening process in which 

potential bidders demonstrate their eligibility to participate by providing 

information such as their credit and bankruptcy history.1

 The process 

could also include a declaration of “beneficial ownership,” which would 

require bidders to declare whether they would bid on their own account or 

on behalf of another entity. According to available information, identifying 

the beneficiaries of allowance transactions may help the entity responsible 

for monitoring the market spot evidence of potential market manipulation. 

Economists and program officials also recommended requiring 

participants to post some type of financial assurance, such as a bond, 

 

1

According to some program officials, creditworthiness may be less of a concern if bidders 

are required to post collateral covering 100 percent of their bids. 

Page 23 GAO-10-377 Climate Change
Appendix II: Other Elements of Auction 

Design 

deposit, or letter of credit demonstrating their ability to pay. Financial 

assurance requirements can serve as collateral in the event that 

participants are unwilling or unable to pay, and thus should be set at a 

level that ensures payment without discouraging participation. In Ireland’s 

first auction, for instance, the nonrefundable deposit was set at about 

3,000 Euro, or about $3,778. According to program officials, this amount 

was later determined to be insufficient to compel payment—for example, 

if the prices in the secondary market fell below the clearing price after the 

auction, it may have been less expensive for the bidder to simply forfeit 

their deposit and nullify the sale. As a result, Irish officials raised the 

deposit amount to about 15,000 Euro, or about $18,890, in the second 

auction. 

While economists emphasize the importance of providing financial 

assurance, it is also important not to impose undue costs or paperwork 

requirements on participants. As a result, some economists recommended 

relying on established measures—such as credit scores—and simplifying 

the process as much as possible. An official involved with administering 

RGGI, for example, reported that RGGI made several improvements to its 

participant qualification procedures—including allowing electronic 

submissions and eliminating notarization requirements—after receiving 

feedback from participants. Program officials involved with the ETS also 

said that outsourcing vetting activities to an entity with experience in 

these activities, like an exchange, may help reduce the cost of these 

activities. 

As existing programs have demonstrated, auction activities—including 

attracting and vetting potential auction participants and facilitating the 

bidding process—can be undertaken by either the government or a 

designated private entity. In RGGI, for example, a private consulting firm 

administers the auctions and conducts these activities. In contrast, 

Germany uses an existing emissions trading exchange to administer the 

auctions and conduct the required due diligence on potential auction 

participants. Another option to cut down on the government’s 

administrative burden is to implement a “primary participant” model, an 

approach used in the United Kingdom to auction both government bonds 

and emissions allowances. In United Kingdom allowance auctions, all 

bidders must go through one of 11 registered primary participants—all 

large financial firms—to place their bids. The primary participants can 

Page 24 GAO-10-377 Climate Change
Appendix II: Other Elements of Auction 

Design 

also bid on behalf of themselves.2 A similar approach is used by the U.S. 

government to auction Treasury bills and bonds—most are purchased by 

banks and securities brokers (primary dealers) that trade directly with the 

Federal Reserve, although individuals and other entities can also 

participate in the auction. According to a program official involved with 

United Kingdom auctions, a major advantage of this model is that primary 

participants are responsible for developing and implementing vetting 

procedures and assume the financial risks associated with default. In 

addition, the banks that serve as primary participants already have 

experience performing background checks. 

However, a primary participant model may also have some drawbacks, 

according to program officials. For example, United Kingdom primary 

participants were initially not compensated for their services, which may 

have dampened participation in the first auction and resulted in a lower 

clearing price. Primary participants are now compensated for each 

indirect bid they facilitate by paying a discounted clearing price.3

According to one official involved in United Kingdom auctions, this has 

improved auction participation and generated higher clearing prices. 

However, the official also acknowledged that some large bidders—such as 

electricity generators—oppose the primary participant model because it 

forces them to disclose their bidding strategy to another entity; they would 

rather participate in the auctions directly. As a result, the outline for the 

draft auctioning regulation for Phase III and beyond proposes allowing 

bidders to access auctions directly. 

Provisions for smaller entities. Another option for encouraging 

participation is to enact special provisions for smaller entities, which may 

be discouraged from participating in auctions due to a lack of information 

or experience. For example, Austria and the United Kingdom have 

implemented “non-competitive” auctions, which allow some entities to bid 

for a limited amount of allowances prior to the actual (competitive) 

auction. By eliminating the need to compete with larger, better-informed 

entities, non-competitive auctions aim to provide assurance that smaller 

 

2

Under United Kingdom Treasury rules, primary participants must prevent the disclosure of 

confidential information they receive from indirect bidders to their employees responsible 

for preparing or submitting bids on the primary participant’s behalf. 

3

The United Kingdom allows primary participants to pay a discounted clearing price— 

5 Euro cents less per allowance—while charging its indirect bidders the actual clearing 

prices. 

Page 25 GAO-10-377 Climate Change
Appendix II: Other Elements of Auction 

Design 

entities will be able to obtain needed allowances without running the risk 

of overbidding. However, thus far participation in non-competitive 

auctions has been low—of the 100,000 allowances set aside for Austria’s 

first non-competitive auction, only about 5,000 were actually sold. Further, 

in the European Commission’s 2009 consultation on the auction 

regulation, respondents showed little interest in incorporating noncompetitive auctions or other special provisions for smaller entities. While 

a Commission official we spoke with acknowledged that few small entities 

contributed to the consultation, this official and others reported that 

smaller entities have generally preferred to purchase their allowances 

from banks and brokers rather than at auction. 

If auctions are used to sell allowances, policymakers must consider issues 

related to timing, including how frequently to hold auctions and whether 

to auction future years’ allowances in advance. According to available 

literature and economists we interviewed, the timing of auctions can have 

implications for market dynamics, prices, administrative costs, and 

participation. A variety of timing approaches are used in existing 

programs—for example, RGGI holds quarterly auctions, whereas Germany 

began holding two auctions twice weekly in 2010. 

Frequency and Timing 

Program officials and economists we interviewed said that determining 

the appropriate auction frequency depends largely on the number of 

allowances auctioned during each year. Several noted that higher volumes 

of allowances may require more frequent auctions, so as to ensure a 

manageable and constant flow of allowances into the market. Because of 

uncertainty about the size of a future U.S. program, one program official 

was hesitant to recommend a specific frequency. 

Nevertheless, available literature and our interviews point to several 

arguments in favor of holding auctions relatively frequently, such as 

weekly. First, economic literature indicates that frequent auctions can 

help maintain market liquidity and price stability. Because allowances 

would be sold in smaller batches, frequent auctions help encourage a 

constant flow of allowances into the market, reducing the impact of 

individual auctions on market prices. For this reason, the outline for the 

draft regulation outline governing Phase III of the ETS and beyond—when 

the level of auctioning is expected to increase significantly—proposes 

holding auctions at least weekly. Second, frequent auctions may help 

covered entities to meet their compliance obligations in a timely and 

flexible manner, rather than running the risk of submitting a losing bid and 

having to wait several months until the next auction. Third, frequent 

Page 26 GAO-10-377 Climate Change
Appendix II: Other Elements of Auction 

Design 

auctions may alleviate the need for a covered entity to set aside large 

amounts of capital to compete for bigger, less frequently available blocks 

of allowances, which may be especially difficult for smaller entities. 

Frequent auctions also may facilitate efficient and flexible transactions 

through financial or other intermediaries, which can benefit both small 

and large covered entities. Finally, smaller, more frequent auctions may 

help mitigate the risk that participants could purchase a substantial 

fraction of allowances in an attempt to manipulate allowance prices. 

However, holding frequent auctions may present trade-offs, according to 

available literature. Administrative and transaction costs could rise if 

auctions are held more frequently, and higher costs could reduce 

participation. In addition, officials involved in administering RGGI’s 

quarterly auctions said it would be difficult to conduct necessary pre– and 

post-auction activities—including finalizing sales, returning auction 

collateral to bidders, and compiling reports—if auctions took place more 

frequently. Another potential disadvantage of frequently held auctions is 

the risk that participation will be low at some auctions. 

Policymakers may choose to sell future-year vintage allowances in 

advance of the compliance year(s) in which they may be remitted. For 

example, in addition to offering allowances for the current 3-year 

compliance period, RGGI auctions also offer participants the ability to 

purchase allowances for the second compliance period, which is to start in 

2012. In the ETS, allowances for Phase III of the program, which begins in 

2013, may be auctioned as early as 2011 or 2012, according to the draft 

outline for the auctioning regulation. 

Available literature and economists and officials we interviewed identified 

several potential benefits associated with auctioning allowances prior to 

the compliance period in which they may be remitted. Most importantly, it 

enables covered entities to hedge against the uncertainty of future 

allowance prices by purchasing them in advance. Auctions of future-year 

allowances may be particularly beneficial to electricity generators, which 

often establish contracts for fuel and electricity one to three years ahead 

of delivery. Entities could also potentially hedge price risk by establishing 

futures contracts with financial intermediaries; however, these 

intermediaries may charge risk premiums that may be passed on to 

customers. 

Available information suggests that holding auctions even before the capand-trade program’s first compliance period may help to jump-start the 

process of price discovery and improve liquidity. For example, RGGI held 

Page 27 GAO-10-377 Climate Change
Appendix II: Other Elements of Auction 

Design 

its first auction in September 2008, approximately 3 months before the 

first compliance period began. A RGGI official said that this early auction 

provided price information that proved beneficial to financial institutions 

and covered entities alike. 

However, holding advance auctions may also present risks. According to 

one program official, if actual emissions under the program are lower than 

expected, auctioning a greater number of allowances early on may depress 

prices in the short term. 

In designing a cap-and-trade program, policymakers may decide to set 

limits around the price of emissions allowances sold at auctions or in the 

secondary market. For example, setting a reserve price would establish a 

minimum price below which no allowances could be sold at auction. The 

use of reserve prices is relatively common in greenhouse gas auctions—for 

example, RGGI and the EU member states we reviewed all used reserve 

prices.4

 Policymakers could also decide to limit the extent to which 

allowance prices could rise and fall in the secondary market through price 

“floors” or “ceilings”. 

Price Controls 

Reserve prices and price floors. According to economic literature and 

program officials, a reserve price may have several benefits. For example, 

a reserve price could reduce incentives for collusion by limiting the 

profitability of collusive activities. A reserve price could also be used to 

safeguard against unusually low clearing prices at an auction due to low 

participation or other unforeseen events. According to one economist, an 

auction that produces allowance prices that are substantially lower than 

those in the secondary market may raise concerns about efficiency and 

equity. Protecting against such a scenario is the primary reason that the 

United Kingdom chose to institute reserve prices for its auctions, 

according to a program official. However, this official did not expect the 

reserve price ever to be triggered, since the likelihood of insufficient 

participation or collusion was extremely low. 

Despite the fact that allowances are traded in secondary markets—where 

the government does not control prices—a reserve price may have effects 

that extend beyond the auction itself. In some cases, for example, the 

reserve price may effectively set a “price floor” for allowances throughout 

 

4

Ireland’s third and final auction did not have a reserve price. 

Page 28 GAO-10-377 Climate Change
Appendix II: Other Elements of Auction 

Design 

the secondary market. According to economic literature, the extent to 

which a reserve price serves as a marketwide price floor depends on 

several factors, including the share of allowances to be auctioned and the 

ability to purchase offset permits or other imported allowances. For 

example, a CBO report said that a reserve price could create a price floor 

if the government chose to sell a significant fraction of emission 

allowances, as opposed to distributing them for free.5

 A key benefit of a 

price floor, according to some economists and researchers, is that it 

provides more consistent financial incentives for investment in low-carbon 

and energy-efficient technologies that could potentially reduce compliance 

costs in the long run. By establishing a minimum price on emissions, a 

price floor could also result immediately in more intensive use of lowcarbon energy sources or encourage consumers to choose goods and 

services that are less carbon-intensive. 

While few economists and program officials disagreed with the use of 

auction reserve prices as a general protective measure, some expressed 

concern about using a reserve price to implement a marketwide price 

floor. For example, program officials involved in administering the ETS 

cautioned that price floors are unnecessary and can unduly interfere with 

the functioning of the allowance market. Accordingly, a European 

Commission official said that while an auction reserve price may be 

incorporated into the auction design, the primary law underpinning the 

ETS bars the use of price floors. Finally, some program officials warned 

that price floors could limit participation from certain entities—such as 

large banks—by reducing their opportunities for profit. 

If a reserve price is used, policymakers would also need to consider what 

to do if it is triggered. Because no bids below the price would be accepted, 

some allowances at the auction would go unsold. One option for 

addressing unsold allowances is to retire them by removing them from the 

program entirely, an approach some researchers and program officials 

support as a way to help preserve the program’s environmental integrity. 

Specifically, triggering the reserve price may indicate that the emissions 

cap is too generous; retiring allowances that remain unsold at the reserve 

price would effectively make the cap more stringent. Another option 

would be to “roll forward” any unsold allowances to the next auction, an 

approach used by the United Kingdom in allowance auctions. Economists 

describe this approach as administratively simple; however, when any 

 

5

CBO, Policy Options for Reducing CO2 Emissions (February 2008). 

Page 29 GAO-10-377 Climate Change
Appendix II: Other Elements of Auction 

Design 

unsold allowances are rolled over, as opposed to retired, future allowance 

prices could be lower, reducing incentives for emission reductions. A third 

option would entail placing the unsold allowances into a “contingency 

bank” and releasing them for sale at the next auction that closed at a price 

above a pre-identified trigger price. This approach removes unnecessary 

allowances from the program while demand is low but keeps allowance 

prices (and compliance costs) from rising as sharply as they otherwise 

would in subsequent periods when demand is high. However, one 

economist cautioned that managing the bank could introduce political 

risks. Importantly, each of these three options applies to a scenario in 

which a reserve price is applied at auction. If policymakers decided to 

implement a firm price floor that applied throughout the secondary 

market, the government would have to guarantee a minimum price to 

sellers in that market. In this case, triggering the floor price would indicate 

that the quantity of allowances offered for sale at the floor price exceeded 

the quantity demanded by market participants. To guarantee the minimum 

price, the government could buy back the excess quantity. However, this 

could create budgetary and other complications, as the government would 

not be able to anticipate market outcomes. 

Price ceilings and strategic reserves. To protect against unexpectedly 

high compliance costs, some cap-and-trade proposals also involve setting 

an upper limit on the price of allowances, either through a price ceiling—

often known as a “safety valve”— or by establishing a “strategic reserve” 

of allowances. A safety valve would give covered entities the opportunity 

to purchase an unlimited amount of additional allowances from the 

government at a predetermined price. In the event the allowance price 

rose higher than the safety valve price, covered entities could buy 

allowances from the government at the lower price rather than purchasing 

them on the market. If the safety valve was triggered and additional 

allowances released, however, emissions could rise beyond the level set 

by the initial cap and compromise the program’s emissions goals. As an 

alternative option, policymakers could set a strategic reserve of 

allowances to be released only if the price threshold is reached. The key 

distinction from a safety valve approach is that the allowances in the 

reserve would eventually be paid back in some way, thus maintaining the 

integrity of the cap over time. If the allowances in the reserve were used, 

for example, the corresponding increase in emissions could be offset, such 

as by tightening emissions caps in future years. 

Some economists and program officials have cited several possible 

advantages associated with price ceilings. Setting a maximum price for 

allowances would provide insurance against unexpected price spikes in 

Page 30 GAO-10-377 Climate Change
Appendix II: Other Elements of Auction 

Design 

allowances—or a sustained period of high prices—either of which could 

cause the price of consumer goods and services to rise. If allowance prices 

are higher than expected, for example, a price ceiling could limit the costs 

to businesses and consumers while new technologies are developed that 

may achieve reductions at less cost. Because it provides some parameters 

around the cost of the cap-and-trade program, a price ceiling could also 

reduce the risk that firms that are both energy-intensive and tradeintensive will face competitive pressures from industries in countries 

without comparable limits on greenhouse gas emissions. Finally, 

establishing price ceilings in advance may increase the likelihood that the 

program will endure through severe economic fluctuations, thus providing 

certainty to investors. 

Several of the potential disadvantages cited for price floors also apply to 

price ceilings—namely, that they may interfere with market functioning 

and discourage participation by financial entities. In addition to these 

disadvantages, a safety valve could have negative environmental 

implications if emissions rise considerably higher than the established 

caps. Available information suggests that establishing a safety valve in a 

U.S. program could impede linkages with other cap-and-trade programs, 

which would allow participants under a U.S. program to trade allowances 

with other programs, such as the ETS. In theory, linking can enhance the 

cost-effectiveness of the participating programs by enabling covered 

entities to take advantage of differences in the cost of abatement options. 

However, establishing a safety valve in one program would have 

implications for other linked programs—for example, linked countries 

may not be able to ensure that their emissions would be below a required 

level in a given year. Additionally, a price ceiling could discourage 

investment in research and development to create new energy-efficient 

technologies by limiting future profits from their sale. Moreover, some 

officials reported that price floors and ceilings are unnecessary if the 

initial cap is set correctly, using accurate, current emissions data, which 

they considered to be a better strategy for regulating prices than using 

price controls to artificially manipulate the market. 

According to available literature and program officials, establishing a 

system to report and monitor auction activities is an important aspect of 

auction design. Effective reporting can increase the program’s 

transparency and help participants make informed bidding decisions. In 

addition, monitoring auction results can help government agencies or 

designated private entities identify instances of market abuse and evaluate 

whether auctions have met established goals. 

Reporting and 

Monitoring 

Page 31 GAO-10-377 Climate Change
Appendix II: Other Elements of Auction 

Design 

Reporting of auction results. If auctions are used, policymakers would 

need to consider how and when to report data on auction results. Several 

program officials recommended making auction results available 

immediately after the auction. According to one official, providing timely 

and accurate data on auction results can provide covered entities with 

information on costs to use as part of their strategic planning efforts. In 

determining which data to report, program officials recommended that the 

government disclose aggregated data such as the quantity of allowances 

sold, the number of participants (and the fraction that won allowances), 

and the clearing price. RGGI makes auction results data available through 

an online program called CO2 Allowance Tracking System, which allows 

the public to download emissions data and relevant auction results. 

While providing timely aggregated data can serve a useful purpose, 

economic literature suggests that revealing too much information about 

auction results could inadvertently facilitate collusion or limit auction 

participation. For example, publicizing the names of auction winners and 

their respective purchases may enable entities to determine whether 

collusive agreements established prior to the auction were honored. In 

addition, program officials said that reporting the identity of bidders 

allows market participants to discern the patterns and strategies of others. 

According to a European Commission official, entities may choose not to 

participate at auctions if they fear that commercially sensitive information 

will be revealed through their bidding. Some program officials noted that 

while restricting access to such data may run counter to traditional ideas 

about transparency, it may serve the public’s best interest to establish 

clear limits around the amount and type of auction data released. 

Monitoring and oversight. An auction monitoring system can help identify 

cases of market abuse, ensure that auctions comply with established rules, 

and provide information useful in evaluating and improving auction 

design. Several program officials recommended designating a market 

monitor to observe and assess activities at auctions and in the secondary 

market. The auction monitor could either be a private or public 

authority—for example, the RGGI program uses a private consulting firm 

to perform a number of market monitoring activities. According to a RGGI 

official, these activities include: ensuring auction rules are consistently 

applied in each auction, analyzing participant behavior and identifying any 

irregularities, and modeling the impact of potential design modifications to 

the program. The RGGI market monitor also analyzes secondary market 

activity, although the Commodity Futures Trading Commission (CFTC) is 

responsible for protecting market participants against fraud, manipulation, 

and abusive trading practices. 

Page 32 GAO-10-377 Climate Change
Appendix II: Other Elements of Auction 

Design 

In Phase I and Phase II of the ETS, individual member states have used 

different methods to monitor auction results. For example, the United 

Kingdom government manages auctions but has appointed an independent 

observer to ensure auctions are conducted in accordance with the law. In 

Austria, an energy exchange handles vetting procedures and auction 

administration while the government handles oversight. For Phase III of 

the ETS and beyond, the EU Directive requires member states to report to 

the European Commission on various aspects of auction outcomes, 

including issues related to access, price formation, and technical issues. In 

addition, the outline for the draft auctioning regulation from Phase III and 

beyond foresees the appointment of a single auction monitor. 

Respondents to the EU’s consultation on Phase III auctioning generally 

favored this proposal, although some respondents noted efforts to curb 

market abuse at auctions would be ineffective if these efforts are not 

accompanied by similar efforts in the secondary market. 

Page 33 GAO-10-377 Climate Change
Appendix III: Allowance Sales Conducted in Appendix III: Allowance Sales Conducted in the EU ETS and RGGI 

the EU ETS and RGGI 

Table 2: Allowance Sales in the EU Emissions Trading Scheme as of 12/31/09 

Amount sold 

Member state 

Method of 

sale Year of sale 

Percentage of 

each member 

state’s cap sold 

(or expected to 

be sold) 

Number of 

allowances 

sold (in 

millions) as of 

12/31/09 Clearing price

Amount of 

revenue 

generated

Ireland Auctions 

(3 total) 

Sale (1 total) 

2006 and 2008

(auctions) 

2009 (sale) 

2.3 (Phase I)

0.5 (Phase II)

1.7 Auction 1: $33.12

Auction 2: 8.65

Auction 3: 0.01

Sale: $17.94

$19.9 million

Hungary Auctions 

(2 total) 

2006 – 2007 2.5 (Phase I) 2.4 Auction 1: 9.34

Auction 2: 1.09

12.5 million

Denmark Sales on an 

exchange 

2006 - 2007 5.0 (Phase I) 5.1 Weighted average price: 

2006-2007: $7.62

38.3 million

Lithuania Auction 

(1 total) 

2007 1.5 (Phase I) 0.6 Auction 1: $.07 40,915

United Kingdom Auctions 

(7 total) 

2008 - 2009 7.0 (Phase II) 29.0 Auctions 1 to 7:

Between $12.87 and 

$19.36

472.7 million

Austria Auctions 

(2 total) 

2009 1.3 (Phase II) .5 Auction 1: $13.66

Auction 2: $16.68

6.1 million

Germany Sales on an 

exchange 

2008 - 2009 8.8 (Phase II) 80.0 Weighted average price: 

2008 sales: $27.97

2009 sales: $15.49

1.7 billion

Source: GAO analysis of ETS data, obtained through interviews with program officials and documents from the European Commission, 

member state governments, and ETS auction administrators. 

Notes: Data as of December 31, 2009. For auctions held in Phase I, this figure represents the 

percentage of actual allowances sold; for auctions held in Phase II, it represents the projected 

amount of allowances to be auctioned, based on National Allocation Plans (NAP) submitted by each 

member state. The Phase II NAPs for the United Kingdom and Austria also indicate that unused 

allowances from the New Entrant Reserve will be auctioned; we did not include these allowances in 

our calculations. Purchasing power parities (PPP) published by the Organization for Economic Cooperation and Development (Main Economic Indicators, February 2010) were used to convert sales 

prices and revenues from euros to dollars. The gross domestic product index was used to adjust the 

resulting figures for inflation. 

Page 34 GAO-10-377 Climate Change 
Appendix III: Allowance Sales Conducted in 

the EU ETS and RGGI 

Table 3: Auctions Held in the Regional Greenhouse Gas Initiative (RGGI) 

Monetary amounts in dollars 

Date of auction Vintage sold 

Number of allowances 

auctioned (rounded)

Number of entities 

submitting bids Clearing price 

Amount of revenue 

raised (rounded)

9/25/08 2009 12.6 million 59 3.07 $38.6 million

12/17/08 2009 31.5 million 69 3.38 106.5 million

3/18/09 2009 31.5 million 50 3.51 117.2 million

2012 2.2 million 20 3.05 

6/17/09 2009 30.9 million 54 3.23 104.2 million

2012 2.2 million 13 2.06 

9/9/09 2009 28.4 million 46 2.19 66.3 million

2012 2.2 million 12 1.87 

12/2/09 2009 28.6 million 62 2.05 61.6 million

2012 1.6 million 8 1.86 

Source: GAO analysis of RGGI auction reports issued by Potomac Economics, RGGI’s independent market monitor. 

Page 35 GAO-10-377 Climate Change
Appendix IV: 

A

GAO Contact and Staff 

cknowledgments 

Page 36 GAO-10-377 

Appendix IV: GAO Contact and Staff 

Acknowledgments 

John B. Stephenson, (202) 512-3841 or stephensonj@gao.gov

In addition to the contact named above, Michael Hix (Assistant Director), 

Cindy Gilbert, Robert Grace, Richard Johnson, Jessica Lemke, Micah 

McMillan, Benjamin Shouse, Jeanette Soares, Ardith A. Spence, and Kiki 

Theodoropolous made key contributions to this report. 

 Climate Change 

GAO Contact 

Staff 

Acknowledgments 

(361035) 
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