Auction of Pollution Permits in a Multi-Pollutant Setting

In the context of rising greenhouse gas emissions and climate change, we propose a pollution control system through the use of the Vickrey-Clarke-Groves (VCG) auction mechanism. Agents bid on pollution permits that grant them a right to pollute a single unit of a pollutant. This auction algorithm efficiently allocates the pollution permits for multiple different pollutants based on the cost of pollution reduction. Previous work addressed only the single pollutant setting while this work addresses the multi-pollutant setting. Our analysis also shows conditions under which we can achieve the highly desirable property of budget balancing.