Pollution permits – Hunter River Salinity Scheme 

The New South Wales Environment Protection Authority (EPA) controls salt concentration in the Hunter River through a market mechanism. In 2014 the CMD designed and implemented new a mechanism to allocate pollution credits. The primary objective of the EPA in this case was to allocate the available credits to those that value them the most. Raising revenue was a secondary consideration in the auction.

A fit-for-purpose, multi-unit auction was designed specifically to elicit the information needed to achieve the allocative efficiency objective. The auction was hosted electronically to allow internet bidding. This auction demonstrated the importance of appropriate design, the advantages and flexibility available in using electronic auctions and the importance bidder training and auction participation when new designs for allocation mechanisms are being implemented.

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