Priceline for Pollution: Auctions to Allocate Public Pollution Control Dollars

Robert W. Adler, University of Utah

Abstract

Priceline for Pollution: Auctions to Allocate Public Pollution Control Dollars explores the intersection of auction theory and public subsidies for pollution control. The article evaluates the use of auctions as a more cost-effective tool to allocate public pollution control dollars compared to traditional public works or other models of resource allocation. It begins by explaining auction theory and design as applied to public procurement, and explains that public pollution control subsidies are simply a way in which the public purchases pollution control services. Just as auctions have been used recently to improve the efficiency of other public procurement programs, auctions can improve the cost-effectiveness of publicly funded pollution control efforts. The article then explains how at least one public pollution control program in the Colorado River Basin has made effective use of competitive bidding, and explores how similar auction designs might apply to other large, watershed-based pollution control efforts such as the Chesapeake Bay Program.