The Use of Auction Revenue from Emissions Trading Systems

Directing revenue from auctions toward projects that generate tangible benefits is a key way to increase the political and social acceptability of an ETS. In practice this often includes climate, energy, and transport investments to further the transition to a low-carbon economy as well as compensating groups that may be disadvantaged by carbon pricing.
Most systems auction at least a portion of their allowances or are moving toward introducing auctioning, but this paper focuses on systems that have a longer history of holding regular auctions and using the proceeds: the European Union (EU ETS), California, Québec, and the Regional Greenhouse Gas Initiative (RGGI). By the end of 2018, these systems and Switzerland had raised over USD 57 billion in revenue from auctioning emissions allowances.