The efficiency implications of different property right allocations when two environmental goods can be produced under the condition of economies of scope are analysed. It is assumed that an environmental agency – acting on behalf of the community – employs an auction‐based mechanism to...

In theory, competitive emission permit markets minimise total abatement cost for any emissionceiling. Permit markets are often imperfectly competitive, however, if they are thin anddominated by large firms. The dominant firm(s) could exercise market power and increase otherfirms’ costs of...